Custody Services and Custodian Banks
Custody services refer to the safekeeping, administration, settlement, and reporting functions related to financial assets (securities, cash, and sometimes commodities) on behalf of institutional clients. The financial institution providing these services is called a Custodian Bank or simply a Custodian.
I. Primary Role: Safekeeping and Risk Mitigation
The core role of a custodian is to separate the ownership of assets from the legal possession and administration of those assets. This critical separation ensures client assets are protected, even if the investment manager or broker handling the transactions goes bankrupt.
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