Custodian Bank
Key Highlights
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A custodian bank is a financial institution responsible for the safekeeping, settlement, and administrative servicing of securities and other financial assets on behalf of investors, funds, or institutions.
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Custodian services are typically used by mutual funds, AIFs, PMS, institutional investors, family offices and large wealth platforms.
What is Custodian Bank?
A Custodian Bank is a financial institution responsible for the safekeeping, settlement, and administrative servicing of securities and other financial assets on behalf of investors, funds, or institutions. It acts as an independent entity to ensure that assets are securely held and properly recorded. Custodian banks play a vital role in maintaining operational integrity and transparency in financial markets.
What Does a Custodian Bank Do?
- Safeguards securities such as equities, bonds, and other instruments
- Settles trades and ensures proper transfer of ownership
- Collects dividends, interest, and other corporate action benefits
- Maintains records and reports holdings
- Supports regulatory and compliance requirements
Who Uses Custodian Services?
Custodian services are typically used by:
- Mutual funds and alternative investment funds (AIFs)
- Portfolio management services (PMS)
- Institutional investors
- Family offices and large wealth platforms
Why a Custodian Bank Matters
- Ensures asset protection and segregation
- Enhances transparency and operational oversight
- Reduces settlement and counterparty risks
- Supports accurate reporting and compliance
FAQs
1. Does a custodian bank manage investments?
No. It safeguards and administers assets but does not make investment decisions.
2. Is a custodian bank mandatory for investment funds?
Yes, regulated funds are generally required to appoint a custodian for asset protection.
3. Can individual retail investors use a custodian bank directly?
Retail investors typically access custody services through brokers or wealth platforms.
4. How does a custodian bank reduce risk?
By segregating assets, ensuring proper settlement, and maintaining accurate records.
5. Are custodian banks regulated?
Yes, they operate under regulatory oversight and must comply with applicable financial regulations.