Relationship Banking

DEFINITION of 'Relationship Banking'

A strategy used by banks to enhance their profitability. They accomplish this by cross-selling financial products and services to strengthen their relationships with customers and increase customer loyalty. Relationship banking involves offering customers a broad array of financial products and services that go beyond simple checking and savings accounts.

In addition to these two basic products, relationship-banking products may include certificates of deposit, safe deposit boxes, insurance, investments, credit cards, loans and business services (e.g., credit card processing). They may also include specialized financial products designed for specific demographics, such as students, seniors or the wealthy.

BREAKING DOWN 'Relationship Banking'

Customers may be able to take advantage of banks' desire to develop relationship banking to obtain more favorable terms or treatment with regard to some banking products as well as to obtain a higher level of customer service. However, federal anti-tying laws established by the Bank Holding Company Act Amendments of 1970 prevent banks from making the provision of one product or service contingent on another (with some exceptions).

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