What is a custodian bank?

A custodian bank is a financial institution that is responsible for the safekeeping of assets, including stocks and shares. They are often known simply as ‘custodians.’

Keeping someone’s stocks safe may sound straightforward but it comes with a whole host of responsibilities.

Custodians will usually be responsible for handling all the bureaucracy that comes with buying and selling stocks. That includes any tax issues, dividend payments or foreign exchange transactions that need to be carried out.

It’s worth noting that a custodian is largely concerned with the mechanics of investing. So if you store cash with a custodian, it’s not like holding a regular bank account that would let you go to an ATM and withdraw money.

In fact, custodial services are distinct from regular banking services. Though there are banks that offer a range of services, their custodial operations will be separate from any consumer or commercial banking services, such as lending or operating bank branches.

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