Global custody is when a third party manages assets owned in multiple countries, often needed by institutional investors, brokers, and money managers. Custodian banks take custody of assets, ensure their safety, and handle transactions, record keeping, and tax documentation. Fees vary, and many international banks offer global custody to increase customer loyalty.
Global custody is the procurement of assets by a third party with branches around the world to manage assets that a company or individual may own in multiple nations. This service is most often needed by institutional investors, brokers, and money managers. Highly wealthy individuals may also need global custody services if they do business internationally and do not wish to entrust their assets to administrative staff.
Custodian banks may perform a number of different functions for their clients. The most basic thing is to take custody of the assets and make sure they remain safe at all times. This may include the storage of physical assets in vaults and other facilities. The custodian bank is responsible for the safety and protection of the assets and maintains records related to your property and any other matter.
Such institutions can also liquidate trades. When companies transact internationally, they rely on the global custodial institution to transfer assets between buyers and sellers. Traders who make stock sales, for example, don’t personally hand over stock and cash to each other. They issue a settlement order to their banks, requesting the transfer to complete the transaction. When global custody is involved because assets are located in other countries, the global custodian handles this process.
Record keeping also enables the collection of income from assets, such as dividend payments due on stocks. The global custodian can cast proxy votes and perform other activities at the owner’s request. It also generates tax documentation in order to present detailed and accurate tax information during tax season. This can be critical for investors with holdings around the world, where manually tracking this information could be onerous, and global custody places assets in the care of bank officials who are familiar with the assets and applicable regional laws. .
Fees for global escrow services vary. Many banks offer services on a large scale, from very basic services to full services. Some have a la carte billing, allowing clients to select from a menu of services they want or need to develop a custom 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 revenue and customer loyalty, as these institutions offer incentives to turn to 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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