CUSTODIAN BANK Meaning and
Definition
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A custodian bank, also known as a custody bank or simply a custodian, refers to a financial institution or a specialized division of a larger bank that is responsible for safeguarding and managing the assets of individuals, organizations, and other financial entities. These assets can include securities such as stocks, bonds, mutual funds, and other investment instruments.
The primary role of a custodian bank is to provide safekeeping services for these financial assets, ensuring their protection from theft, loss, or unauthorized access. Custodians maintain secure physical and electronic storage facilities to hold the securities and documents representing the assets. They also employ stringent internal control measures to prevent fraudulent activities.
Apart from safekeeping, custodian banks offer a range of ancillary services to their clients. These services include record-keeping, asset servicing, trade settlement, corporate actions processing, and reporting. They may also facilitate the collection of dividends, interest payments, and other income streams associated with the assets. In many cases, custodians provide detailed reporting on portfolio holdings, transactions, and performance to clients, allowing them to monitor and manage their investments effectively.
Custodian banks play a crucial role in the global financial market, serving as intermediaries between investors and issuers, ensuring the efficient and secure movement of securities, and providing transparency and accountability in the management of financial assets. They are subject to regulatory oversight and often must meet specific capital and operational requirements to ensure the safety of the assets entrusted to them.
Common Misspellings for CUSTODIAN BANK
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Etymology of CUSTODIAN BANK
The word "custodian" comes from the Latin word "custodia", which means "guardian" or "protector". It is derived from the Latin verb "custodire", meaning "to guard" or "to watch over".
The term "custodian" originally referred to a person who was responsible for guarding or protecting something, such as a building or valuable possessions. Over time, the term expanded its meaning to also include entities that provide safekeeping and protection of assets, particularly financial assets.
The word "bank" is derived from the Italian word "banca" and the Old High German word "bank", both of which mean "bench". In ancient times, moneylenders and traders conducted their business while sitting on benches or tables. These trading places eventually became associated with banking, and the term "bank" was adopted.
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