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Custodian banks safeguard the financial assets of individuals or companies. They also carry the responsibility for holding financial instruments necessary for growth.
Although lesser-known than other types of banks, custodians act like storage facilities for assets in physical or electronic form. Custodians also help in collecting dividends, settling transactions, and dealing with taxes.
Without further ado, let’s dive in and uncover what is a custodian bank and why you might need one.
What is a Custodian Bank?
A custodian is a special banking institution that protects its customers’ financial assets and securities from theft or loss. The custodian bank may hold certificates, mutual funds, stock, equities, bonds, ETF units, and other assets.
These financial institutions can also serve as a third-party check that safe-keeps the assets of a mutual fund, protecting the assets against the fund managers or loss from fraud.
What Do Custodians Do?
Unlike traditional banks, custodian banks don’t offer personal loans, mortgage lending, branch banking, ATMs, or personal checking accounts.
Instead, custodian banks provide various administrative and asset protection services including:
- Performing foreign exchange transactions
- Administering both voluntary and involuntary corporate actions on securities
- Holding stocks
- Collecting dividends
- Reporting
- Handling tax information
- Disseminating key securities information
- Among others
What Are Custodian Bank’s Unique Functions
Custodian banks are responsible for holding securities and other assets worth billions of dollars. Therefore, they must be regulated, trusted, and reputable firms.
A custodian bank has 3 primary roles:
- Safekeeping of assets
- Asset servicing
- Trade processing
What Makes a Great Custodian Bank
The best custodian banks use their superior technical knowledge and expertise to properly assist and help their clients save for their future. When choosing a custodian, ensure it is a leader in the industry and provides superb custodial services to its customers.
You should also get the best value for your money – otherwise, the costs can be a big deal-breaker.
The Bottom Line
At Global Custodian Solutions, we’re not only trusted by all nodes of the financial industry, but have also facilitated several multi-billion dollar custodial transactions across multiple jurisdictions for our members.
Caring for our clients’ financial assets is our responsibility and the foundation of our business. To learn more about Global Custodian Solutions, please visit www.globalcustodiansolutions.com
