Global custody is a service offered by custodian banks to manage and protect assets owned by businesses or individuals in multiple countries. It includes record-keeping, trading regulation, and tax documentation. Rates vary, and many international banks offer global custody to increase customer loyalty.
Global custody is the protection of assets by a third party with branches around the world to manage assets that a business or individual may own in multiple countries. This service is most commonly requested by institutional investors, brokers and money managers. Very wealthy individuals may also need global custody services if they do business internationally and do not want to entrust their assets to a management staff.
Custodian banks can perform a number of different functions for their customers. The simplest is to take custody of the assets and ensure they remain safe at all times. This may include storing physical assets in vaults and other facilities. The custodian bank is responsible for the safety and security of the assets and maintains records relating to their ownership and any other matters.
Such institutions can also regulate trading. When businesses transact internationally, they rely on the global custody institution to transfer assets between buyers and sellers. Traders who sell stocks, for example, don’t trade stocks and cash themselves. They issue a settlement order to their banks, requesting the transfer to complete the transaction. When global custody is involved because the assets are located in other countries, the global custodian handles this process.
Record keeping also allows for the collection of business revenues, such as dividend payments due on stocks. The global custodian can cast proxy votes and perform other tasks at the owner’s request. It also generates tax documentation for the purpose of filing detailed and accurate tax information during the tax season. This can be critical for investors with worldwide holdings, where manually tracking this information could be burdensome and global custody entrusts assets to bank officials familiar with the business and applicable regional laws.
Rates for global custody services vary. Many banks offer services on a large scale, ranging from a very simple service to a full service. Some have a la carte billing, which allows customers to choose from a menu of services they might want or need to develop a customized plan for managing their assets. Many international banks offer global custody, allowing regular customers to stay with them no matter where in the world they do business. This increases revenues and customer loyalty, as these institutions provide incentives to approach them first, such as discounts for repeat customers or special promotional rates for customers who bring their business from other companies.
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