At the centre of world business
PATHFINDER Corporate Banking, if it were to be featured in the ‘Lord of the Rings’ trilogy, would be called ‘Middle Earth’. Sourabh Chirimar tells you why a career as a relationship manager or an operations officer can be challenging
Corporate banking services all the banking needs of businesses. It is the department that facilitates all transactions between the bank and the corporates it serves. Usually, it is also the department that coordinates various product and service teams within the bank itself, to service corporate transactions.
In essence, it is the lending arm of the bank. Its key role is to deploy the money the bank mobilises through deposits and various other sources, at higher returns than the cost of borrowing.
The typical corporate bank, looking at it from the bird’s eye view, is structured into a relationship team, a credit team, a transaction banking team and an operations team.
A relationship team will source business for the bank. The relationship team is usually divided into segments like large corporates, emerging/mid corporates, MSME (Micro, Small and Medium Enterprises)/ business banking as each of these have unique requirements. A relationship manager will also have his own geography.
The relationship manager will typically visit clients and understand their requirements. If the requirement is for a loan, he will take this up himself. He now has to convince his own bank that the client can repay (pay principal) and service (pay interest/fees) the loan. He will put together all the information required, to have this loan approved.
This evaluation is done by the credit risk department, which will objectively study the capability of the client to repay the loan. To do this, the risk/credit manager will study the financial statements — like the P&L, balance sheet — and also study in detail the business model of the company and the events in the industry/sector and the larger economy. Finally, the risk department will assign a rating (a symbol like AAA or BB) to it, that denotes a recommendation to accept or reject the loan. This rating exercise is also done by external rating agencies that specialise in analysing risk. Think CRISIL and ICRA.
The actual disbursal (payout) of the loan and its monitoring of repayments and conditions set to the borrower is done by the operations department.
But, what if the client has requirements other than a loan? And what can these other requirements be? Imagine the simplest model of an economy. What do you see people doing? They are buying goods and services and selling goods and services, right? This event can be called a trade/transaction and involves exchange of goods/services for money.
The transaction banking group facilitates trade/transactions between corporates/ individuals. It provides products and services to facilitate an import transaction, or an export transaction, or a project contract, or even a regular buy-sell transaction between two parties — often in different countries. It will collect documents for its clients or provide them with a letter of credit (which is a letter from the bank, guaranteeing payment if the terms of the contract are met) or provide bank guarantees (this simply guarantees either performance of a task, or amount to be paid). There can also be many other needs, for foreign exchange, for risk management and many other transactions that a bank facilitates. Banks have separate departments for each type of need and the relationship team will coordinate the interaction of various product departments with the client. So, let’s now look at what are key roles in the corporate banking division and the skills that banks look for when hiring for these divisions.
- Relationship Manager: This is a client facing role. Banks look for someone with good communication skills and sound basic concepts of finance. The RM is the closest to the client and should have the drive to take transactions/deals through to completion. MBAs are the most common profile for recruitment for these roles, as they are seen to have both soft skills as well as basic finance knowledge. While there are no courses/ certifications that address this role specifically, the Corporate Banking Area at www.learnwithflip.com has a course that is targeted at the relationship management role.
-Credit Risk/Risk Manager: The risk manager is the person who goes into the depth of everything. He has a view towards the economy and how various industries are doing. He needs to be good with financial statements and be decisive and careful when recommending/rejecting credit proposals. Banks will look at someone with good analytical skills for this role. Both MBAs and CAs are recruited at the entry level. Candidates interested in this can look at GARP (http://www.garp.com/frmexam/) that offers the FRM — Financial Risk Manager — certification; while PRMIA (www.prmia.org) — Professional Risk Managers’ International Association — is also widely accepted.
-Transaction Banking: Transaction banking can have a variety of roles such as product manager, product sales manager, operations etc. ‘Operations’ is a key and large function within transaction banking. Again, banks look at MBAs and CAs for sales and product roles and graduates for operations. There are various trade certifications available. Again a google search (choose ‘pages from India’) for ‘transaction banking certifications’ will give you a variety of options.
-Operations: The role of an operations officer/manager requires both high intelligence and a key skill that is rare to find — attention to detail and diligence. Banks are perpetually looking for good people in this area and graduates are hired in large numbers here. Now, you have an overview of the corporate banking world. It’s an exciting world to be in, and if you choose this as your career, you will be at the centre of the world of business.
>> Next in this series, we will be looking at the world of investment banking.