Answers about Bank Custodians

What is a bank custodian?

A bank custodian is responsible for maintaining the safety of clients’ assets held at one of the custodian’s premises, a sub-custodian facility, or an outside depository.

January 2010

What services are provided by bank custodians?

A bank custodian that provides core domestic custody services typically settles trades, invests cash balances as directed, collects income, processes corporate actions, prices securities positions, and provides recordkeeping and reporting services.

January 2010

Who are clients of bank custodians?

Banks provide custody services to a variety of customers, including mutual funds and investment managers, retirement plans, bank fiduciary and agency accounts, insurance companies, corporations, endowments and foundations, and private banking clients. Banks that are not major custodians may provide custody services for their customers through an arrangement with a large custodian bank.

January 2010

Are my assets safe with a bank custodian?

Assets held by banks in a custodial capacity do not become assets or liabilities of the bank. In the event of a change in bank ownership, custody assets remain the property of the account owner. They are not subject to the claims of the bank’s creditors.

January 2010

How are bank custodians regulated?

National bank and federal savings association (collectively, banks) custodians are regulated by the Office of the Comptroller of the Currency. Custody is a volume-driven, transaction-processing business, and much of the risk associated with it is operational in nature. For this reason, strong operational controls (separation of duties, dual control, and accounting controls) are essential to effectively manage operational risk. The Comptrollers Handbook for Custody Services outlines various risk management systems expected of banks custodians and in their selection of sub-custodians. These include operational controls, account acceptance and monitoring, management information systems, and board and management supervision.

July 2017