Product Code Database
A custodian bank, or simply custodian, is a specialized financial institution responsible for providing securities services. It provides post-trade services and solutions for asset owners (e.g. sovereign wealth funds, , insurance companies), , and . It is not engaged in "traditional" commercial or consumer/retail banking like lending.
In the past, the custodian bank purely focused on custody, safekeeping, settlement, and administration of securities as well as asset servicing such as income collection and corporate actions. Yet, in the modern financial world, custodian banks have started providing a wider range of value-adding or cost-saving financial services, ranging from fund administration to transfer agency, from securities lending to trustee services.
Since the Act has become effective, employers could not hold and keep their pension fund assets. Instead, they are obligated to appoint external custodians to safekeep the assets. Also, they are required to appoint trustees and depositories to ensure the pension funds are operated in the best interest of the pension holders and aligned to the investment mandates.
The bank may offer the following products & services:
| Global Custody | Safekeeping and administration of assets of clients, for instance, asset managers & owners, in multiple markets. They serve as the first point of contact for their global clients. However, they may not have such a strong network in every jurisdiction in which the clients want to invest. Hence, the global custodian needs to appoint and manage direct custodians which have existing securities services infrastructure in some individual markets. |
| Fund Administration | Fund accounting and valuation services across different fund types and structures by using the bank's integrated fund accounting platform. For example, offering Net asset value (NAV) and portfolio holding etc. reports and financial reporting support. Usually, ETF services also fall under the scope of fund admin. |
| Transfer Agency | Handling fund subscription and redemption for funds like mutual funds and ETFs. Also, to conduct shareholder servicing and recordkeeping for dividend payout purpose. |
| Securities lending | Lending of securities from one party to another for a limited period of time, in exchange for a lending fee and collateral. The objective of securities lending is to enhance the liquidity in the secondary market especially for benchmark or actively traded securities by providing mechanisms to increase market liquidity, market making activities and also to enhance the return on portfolio investment. |
| Middle Office Outsourcing | Offers technical solutions and post-trade execution operational services. For example, portfolio management tools such as portfolio management, pre-trade compliance and order management. Also, trade Management functions like trade confirmation and dissemination of settlement instructions, and investment operational function, investment record-keeping, reconciliation, pricing, CA processing, derivatives processing etc. It helps the fund houses to decrease operational costs and risks. |
| Treasury Products | Provides cash management solution for idle cash of fund managers and also FX solutions for securities transactions. |
| Collateral Management | Banks can optimize financial institutions' collateral portfolios with internal analysis tools and flexible two-way/three-way solutions. A number of global banks can make better use of their global capabilities to help FI manage one-stop global or onshore collateral, and meet complex financing and liquidity needs. |
| Trustee | Act as a separate third-party function to oversight and monitor the fund manager investment compliance and also its service providers' responsibilities. |
The bank may offer the following products & services:
The definition of "shareholder" is generally upheld by corporate law rather than securities law. One role of custodians (which may or may not be enforced by securities regulation) is to facilitate the exercise of share ownership rights, for example and processing and other payments, corporate actions, the proceeds of a stock split or a reverse stock split, the ability to vote in the company's annual general meeting (AGM), information and reports sent from the company and so forth. The extent to which such services are offered are a function of the client agreement together with relevant market rules, regulations and laws.
As of 2022, the market size (as measured by revenue) of the Custody, Asset & Securities Services industry in the US is $32.5bn, with a YoY 2.9% growth between 2017 and 2022.
For instance, Citi and HSBC restructured and combined their Global Markets and Securities Services divisions in 2019 and 2020 respectively.
Players include (in alphabetical order):
| BNY | 46.6 trillion | May 2023 |
| State Street | 38.2 trillion | 30 June 2022 |
| JPMorgan Chase | 28.6 trillion* | 30 June 2022 |
| Citi | 26.8 trillion | 30 June 2022 |
| Northern Trust | 15.7 trillion | 10 January 2025 |
| BNP Paribas | 13.9 trillion | 30 June 2022 |
| HSBC | 13.9 trillion | 30 June 2022 |
| CACEIS | 7.8 trillion | 31 December 2021 |
| Societe Generale | 5.0 trillion | 30 June 2022 |
Data on Assets under Custody and Assets under Administration have been collected by globalcustody.net and fundservices.net since 1999, running to 50+ service providers. Performance of 19 service providers against service benchmarks is reported at ServiceMatrix.
| Americas | JPMorgan Chase |
| Asia-Pacific | HSBC |
| Europe, Middle East, and Africa (EMEA) | HSBC |
In July 2003, HSBC announced the agreement to acquire 82.19% of Korean fund administrator Asset Management Technology (AM TeK) for $12.47 million in cash, which was the biggest fund administrator in South Korea, with $24 billion of assets under administration.
In August 2003, U.S. Bancorp acquired corporate trust business of State Street for $725 million.
In October 2004, Citi acquired ABN AMRO's direct custody, securities clearing, and fund services businesses in selected European and Asian markets for around $50 million.
In November 2005, U.S. Bancorp announced that it was purchasing the corporate trust and institutional custody businesses of Wachovia Corporation.
In July 2006, HSBC announced that it was acquiring Westpac sub-custody operations in Australia and New Zealand for $112.5 million, making the British bank the leading sub-custody and clearing player in Australia and New Zealand.
In July 2007, the merger between Bank of New York and Mellon Financial Corporation had been finalised to create BNY Mellon, which is the largest custodian and asset servicer with more than $18trn in assets under custody and administration at that time.
In July 2007, State Street confirmed that it was acquiring Investors Financial Services for $4.2 billion.
Also in July 2007, the French bank BNP Paribas announced an acquisition of a minority stake of 33.4% in the capital of SLIB, which had been a 100% subsidiary of Natixis prior to the acquisition.
In November 2009, J.P. Morgan Chase acquired ANZ's custodian services business, including access to more than 100 clients and US$90.71 billion in assets under custody.
In April 2010, Standard Chartered acquired Barclays African custody business, which had assets under custody of $3.8 billion.
One month later, in May 2010, State Street announced the completion of its acquisition of Intesa Sanpaolo's Securities Services business (ISPSS) for €1.28 billion in cash.
In February 2018, Butterfield Bank announced that it was purchasing Deutsche Bank's Global Trust Solutions business in the Cayman Islands, Jersey and Guernsey.
In March 2020, Citi announced that it was buying Royal Bank of Canada's custody business in Australia.
In January 2021, U.S. Bancorp acquired the debt servicing and securities custody services client portfolio of MUFG Union Bank, with approximately 600 client relationships and $320 billion in assets under custody and administration.
In September 2021, State Street announced that it was acquiring Brown Brothers Harriman's Investor Services business, including its custody, accounting, fund administration, global markets and technology services, for $3.5 billion in cash. However, in November 2022, State Street and BBH announced the termination of this transaction.
In January 2022, Standard Chartered announced an agreement to acquire 100% ownership of RBC Investor Services Trust Hong Kong Limited from RBC Investor & Treasury Services, expanding its custodian business to MPF and ORSO schemes trusteeship business in Hong Kong.
Self-directed retirement account custodians (also known as "self-directed IRA custodians" or "self-directed 401k custodians") should not be confused with a custodian bank, which strictly provides safekeeping for securities. While a self-directed retirement account custodian can provide custody for securities, typically it will specialize in non-security assets, or alternative investments. Examples of alternative investments would be: Real Estate, precious metals, private mortgages, private company stock, oil and gas LPs, horses, and intellectual property. These types of assets require a specialization on the part of the custodian due to the complexity of the documentation required to keep the alternative investments in compliance with the IRC.
A mutual fund retirement account (IRA, SEP etc.) custodian, however, refers to the plan administrator and recordkeeper such as noted above, which may not necessarily be the same institution providing custody services to the investments of the overall fund.
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