Banking Operations and Business Lines
The banking balance sheet
Banks earn a spread: the difference between asset yields (loans, securities) and funding costs (deposits, borrowings). Candidates should understand the core business lines-retail, commercial, wealth, treasury, payments-and how each generates revenue and risk.
Retail and commercial banking
Retail banking involves deposits, consumer loans, mortgages, and cards. Commercial banking covers business lending, cash management, and trade finance. Traps ask you to distinguish products by risk profile: commercial lending carries credit concentration risk; retail carries higher volume and operational risk.
Payments and operations
Wire transfers, ACH, checks, and card networks each carry distinct operational and fraud risks. Know that wire transfers are irrevocable once sent-fraud prevention depends on callback verification and dual approval. ACH has return windows; cards have chargeback rights.
Treasury and liquidity
Treasury manages liquidity, interest-rate risk, and the investment portfolio. Key concepts: the liquidity coverage ratio (high-quality liquid assets against 30-day stressed outflows) and the net stable funding ratio (stable funding against long-term assets).
Worked example
A customer requests an urgent wire to a new beneficiary. Rule of thumb: new beneficiary plus urgency equals elevated fraud risk. The correct control is independent callback to a known number, not email confirmation.
Traps to expect
Questions blur product boundaries-e.g., describing a commercial line of credit as a retail product-or ask which business line owns a control when the answer is operations, not the front office.