Corporate & Transaction Banking
Lending to companies, running the accounts their cash moves through, financing what they ship, and managing the bank's own balance sheet behind all of it.
Banking: Takes the deposit, makes the loan, moves the money. the whole map
The seats
four of them, each answering the same six questions so that they can be read against each other.
Next to it
The other group on the same side of the price.
What an interview asks here
These questions are checking whether you know that the loan is rarely the point: it is the entry ticket to a relationship priced across several products.
Try each one out loud before you open it. What is underneath is the shape of a complete answer, not a script — somebody who can produce those parts in their own words can also answer the four variations that follow, and somebody who has memorised a paragraph can answer one.
Q1Why would a bank lend at a spread that does not cover its cost of capital?
What it is checking. The single most characteristic thing about this business, and it looks irrational until it is explained.
A complete answer contains:
- Because the loan is priced as part of a relationship, not on its own.
- The return is expected to come from the accounts the company's cash moves through, the hedges it puts on, and the fee business when it buys something.
- That is a real commercial argument and it is also how banks talk themselves into underpriced credit.
- The test is whether the rest of the business actually arrived, measured per client rather than assumed.
Read it properly: Corporate lending · Transaction banking
Q2What is a covenant for?
What it is checking. Checking whether you think a covenant is a punishment or a trigger.
A complete answer contains:
- It is a right to a conversation, triggered early enough that something can still be done.
- It does not stop a company deteriorating; it stops the lender finding out last.
- Which is why the useful question about any covenant is what it permits rather than what it forbids.
- And why covenants loosen when credit is easy, exactly when they would have been worth most.
Read it properly: Reading a credit agreement · The leveraged finance desk
Q3Cash-flow lending against asset-based lending — when does the difference matter?
What it is checking. Two ways to secure a loan, and one of them is a forecast.
A complete answer contains:
- Cash-flow lending secures against what the business is expected to earn, tested by covenants.
- Asset-based lending secures against something countable — receivables, inventory, equipment — and is sized off that.
- In a good year both look the same; in a bad one the forecast disappears and the countable thing does not.
- The trade is that asset-based lending advances less and survives more.
Read it properly: Corporate lending · Factoring
Q4What does a treasurer actually want from a transaction banking relationship?
What it is checking. Whether you can describe the client's problem rather than the bank's product.
A complete answer contains:
- One view of cash across every entity and currency, which sounds trivial and is the hardest part.
- Money in the right legal place on the right day, which is a question about location as much as about totals.
- Payments that do not fail, and a fast answer when one does.
- And structures — sweeps and pooling — that are legally sound rather than merely convenient.
Read it properly: Corporate treasury · Transaction banking
Q5Why does a bank charge for an undrawn facility?
What it is checking. A commitment is a position, and this checks whether you see it.
A complete answer contains:
- Because the commitment is real: the bank has to hold capital and be able to fund the drawing whenever it comes.
- And it will come at the worst moment — undrawn lines are drawn when a company cannot fund itself elsewhere.
- So the commitment fee pays for an option the borrower holds and the bank has written.
- A facility that is free to keep open is one the bank has mispriced.
Read it properly: Treasury and ALM · Liquidity
Q6How does a letter of credit change who the seller is relying on?
What it is checking. The whole of trade finance in one substitution.
A complete answer contains:
- The seller stops relying on the buyer's willingness to pay and starts relying on a bank's obligation.
- The bank pays against documents rather than against goods; it never sees the cargo.
- That makes the paperwork the security, and it is exactly what a fraud exploits.
- It also turns the exposure into a bank and country line rather than a corporate credit.
Read it properly: Trade finance · Trade and supply chain finance
Q7What is funds transfer pricing and why does getting it wrong matter?
What it is checking. The internal number that quietly decides which businesses a bank grows.
A complete answer contains:
- Treasury charges every lending desk for the funding it uses and credits every deposit business for the funding it brings, at a published curve.
- That curve is what makes a loan look profitable or not before any credit judgement is applied.
- Set it too low for long maturities and the bank grows exactly the lending it should be discouraging.
- So it is not an accounting formality: it is the price signal the whole balance sheet responds to.
Read it properly: Treasury and ALM · The yield curve
Do these against a clock — one at a time, ninety seconds each, answer before you look.
Whose questions these are. Every question on this page was written for this publication. None is taken from anybody else’s question bank, and none is a claim about what any named firm asks — that is neither verifiable from here nor ours to assert. They are our own reading of which mechanism a question of this kind is testing. Information and education only.
Test yourself: five questions
Five quick questions on this part of the industry — checked entirely on your device, nothing stored or sent. Wrong answers come with explanations, and the seat pages above hold every answer. For education only.