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, asset managers, banks and broker-dealers. Custodial banks do not engage in traditional commercial or retail banking services like lending.
Custodian banks provides a wide range of value-adding or cost-saving financial services, such as fund administration, transfer agency, securities lending, and trustee services.
Definition Custodian banks are often referred to as global custodians if they safe keep assets for their clients in multiple jurisdictions around the world, using their own local branches or other local custodian banks ("sub-custodian" or "agent banks") with which they contract to be in their "global network" in each market to hold accounts for their respective clients. Assets held in such a manner are typically owned by larger institutional firms with a considerable number of investments such as banks, insurance companies, mutual funds, hedge funds and pension funds.
History Early history In 1961, U.S. President John F. Kennedy established a Committee on Corporate Pension Plans. Two years later, Studebaker Auto Manufacturer shuttered its business and operations, and it failed to provide pensions to the approximately 7,000 employees affected. Hence, in 1974, U.S. President Gerald Ford proposed an Employee Retirement Income Security Act (ERISA Act), protecting the employee benefit plans' standards.
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.
Further developments Banks have developed a wide range of custody and related services (securities services), and have been developing new technologies (e.g. blockchain, API, distributed ledger) and aligning with the fast-moving regulatory requirement, such as digital assets.
Client segments and products The securities services industry mainly serves two types of clients: 1) Asset Owners & Managers and 2) Banks, Brokers & Dealers.
Asset owners and managers The client segment of Asset Owners & Managers includes asset management companies, alternative asset managers, insurance companies, pension funds, sovereign wealth funds, central banks, family offices and prime brokers.
The bank may offer the following products & services:
Product / Service Description 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 Services Act as a separate third-party function to oversight and monitor the fund manager investment compliance and also its service providers' responsibilities.
Banks, brokers and dealers The client segment of banks, brokers and dealers includes global custodians, banks, brokers and dealers.
The bank may offer the following products and services:
Product / Service Description Direct Custody & Clearing A Direct custodian offers custody services in their local markets. Global custodians are their focused clients as direct custodians can offer knowledge and experience of the markets and industry, and close relationships with the local regulators in the local market, which the global custodian might lack but require. Therefore, it is responsible for the safekeeping and administration of assets of clients, for instance, asset managers & owners, in a local market. Third Party Clearing The TPC model enables easier access to the cash market through segregation of trading and clearing participantships. Account Operators The AO model allows local and cross-border broker-dealers to outsource their securities back-office operations to the custodian bank, which will act on behalf of broker-dealer clients in the clearing and settlement of trades executed on the exchange while clients will continue to handle all front-office related activities such as research, trading and investor servicing.
Importance of custodian Using US definitions, a person who owns street name securities and who is not a member of an exchange holds the securities through a registration chain which involves one or more custodians. This is due to the perceived impracticality of registering traded securities in the name of each individual holder; instead, the custodian or custodians are registered as the holders and hold the securities in a fiduciary arrangement for the ultimate security holders. However, the ultimate security holders are still the legal owners of the securities. They are not merely beneficiaries of the custodian as a trustee. The custodian does not become at any point the owner of the securities, but is only a part of the registration chain linking the owners to the securities. Global securities safekeeping practices vary substantially, with markets such as the UK, Australia and South Africa encouraging designated securities accounts in order to permit shareholder identification by companies.
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 dividends 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.
Industry profile Industry size As of end-2023, the market size (as measured by worldwide client assets under custody and/or administration) amounted to some $230 trillion. The market share of the largest global custodians has varied quite dramatically over the past 25 years
As of 2022, the market size (as measured by revenue) of the Custody, Asset & Securities Services industry in the US is $32.5bn, with a YoY 2.9% growth between 2017 and 2022.
Industry players Many investment banks and banks offer securities services. Generally, the division of securities services is either grouped with Global Markets to form a larger umbrella of Markets & Securities Services (MSS) or falls under the umbrella of Corporate Banking or Transaction Banking.
For instance, Citi and HSBC restructured and combined their Global Markets and Securities Services divisions in 2019 and 2020 respectively.
Players include (in alphabetical order):
BNP Paribas: Securities Services BNY: Securities Services Citi: Markets & Securities Services Crédit Agricole: CACEIS Investor Services Deutsche Bank: Corporate Banking HSBC: Markets & Securities Services J.P. Morgan: Markets & Securities Services Mizuho: Institutional Services Morgan Stanley: Fund Services MUFG: Investor Services Northern Trust: Asset Servicing Royal Bank of Canada: Investor & Treasury Services SMBC: Custody and Securities Services Société Générale: Global Markets and Investor Services Standard Chartered: Financial Markets State Street: Asset Servicing
Industry ranking Global According to the Asset under Custody League Table as of Q4 2025 by Global Custodian, custodian banks' assets under custody and/or administration (AUC/AUA) are:
Company AUC/AUA (US$) BNY 59.3 trillion State Street 58.3 trillion JPMorgan Chase 41.1 trillion Citi 31.4 trillion BNP Paribas 20.5 trillion Northern Trust 18.7 trillion HSBC 15.5 trillion U.S. Bancorp 12.3 trillion CACEIS 11.3 trillion Societe Generale 7.1 trillion Royal Bank of Canada 2.1 trillion
Regional According to the Global Custody Survey 2020 by Global Investor Group, the top custody regional players are:
Region Bank Name Americas JPMorgan Chase Asia-Pacific HSBC Europe, Middle East, and Africa (EMEA) HSBC
Notable industry acquisitions 2000 to 2010 In November 2002, State Street announced that it had acquired global custody business with assets under custody of approximately €2.2 trillion of Deutsche Bank's Global Securities Services (GSS) business for $1.5 billion, subject to adjustment.
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.