20 years: Corporate banking
In the first part of this two part video series, Ritu talked about the role of corporate banking, and illustrated using a loan and swap example. In this video, she continues to cover the suite of corporate banking products, using the same illustration.
In the first part of this two part video series, Ritu talked about the role of corporate banking, and illustrated using a loan and swap example. In this video, she continues to cover the suite of corporate banking products, using the same illustration.
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9 mins 9 secs
In this video Ritu explores the suite of corporate banking products and services such as working capital loans, letters of credit whilst using illustrations/examples.
Key learning objectives:
Identify and explain the different corporate banking products
Understand what's next for corporate banking
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The difference between liquid, short term assets and the short term liabilities. It is the amount that the company uses in its day to day trading operations and can also be expressed in the number of days or working capital cycle. Solar Plc will need funds to finance buying of raw materials which Barclays or HSBC as relationship banks can provide through working capital loans. These are typically short term loans and are for the purpose of helping a corporate manage its working capital cycle.
These are an important trade finance product enabling finance to be provided until payment for goods is received and can be used to fund regular or one-off purchases of goods and raw materials.
By issuing a Letter of Credit - This is an undertaking by a bank on behalf of the buyer to pay the supplier the agreed amount, at the end of the agreed term, subject to certain conditions being met.
In this example, Banco do Brasil is issuing an Import LC. Solar Plc is receiving an Export LC. By accepting the LC issued by Banco do Brasil, John has transferred Solar Plc’s risk from BZ to Banco do Brasil. While Banco do Brasil has assumed credit risk on BZ, its existing corporate banking client.
LC discounting -- a form of invoice discounting -- allows Solar PLc. to receive funds upfront but at a discount to the face value of the invoice.
Most corporate banking products are being impacted by the digital revolution. Robotics, Artificial Intelligence and Machine Learning are changing the way banking is conducted and a key focus is on the consumer experience. Some examples are paperless, time efficient trade finance through block chains, Artificial Intelligence based automation of foreign exchange settlement, automated credit decisioning etc.
In addition, Corporate Banking is evolving to design Green products that not only consider environmental and social impact but also focus on transparency and speed of execution.
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