Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What does wholesale banking refer to?

1. Banking services for everyday consumers.

2. Transaction services between merchants and consumers.

3. Banking services between merchant banks and financial institutions.

4. Payments processing for retail purchases.

The correct answer is: Banking services between merchant banks and financial institutions.

Wholesale banking encompasses a range of financial services that cater primarily to larger institutions rather than individual consumers. The focus is on providing services such as lending, treasury management, and financing that facilitate large-scale transactions between banks and other financial entities. This type of banking typically involves activities like syndicating loans, trading in securities, offering foreign exchange services, and providing investment management. The correct choice highlights the direct relationship between merchant banks and financial institutions, which is foundational to wholesale banking. This sector operates differently from retail banking, which is oriented towards providing banking services to individuals and small businesses. Retail banking is characterized by services aimed at everyday consumers, such as checking accounts, savings accounts, and personal loans. In wholesale banking, the customers are often other banks, corporations, and government bodies, which reflects a higher level of complexity and volume in transactions compared to those found in retail banking. Therefore, the relationship and services provided by wholesale banks to financial institutions highlight the distinctive nature of this sector in the banking industry.