Custodian is a company or person who keeps assets in the form of stocks and securities in physical or electronic form. Read more below for more details. Before that you can read the trading article on our website. You can also follow GIC's instagram and youtube to get more information and education about trading.
What is a Custodian?
A person entrusted with the custody and protection of property or records or with the custody or guardianship of prisoners or inmates. A custodian is responsible for safeguarding and maintaining investments and securities on behalf of their owners.
What is a Custodian Bank?
Custodian Bank is a company or financial institution that stores valuable or valuable documents belonging to customers to be secured so that they are not lost or stolen. This bank can store other assets or stocks in physical or electronic form on behalf of their customers. Mutual fund companies need organizations or banks to store and store records of their assets and investments that have been acquired using pooled funds from a large number of investors. Custodians help ensure the interests of investors by tracking and ensuring the security of their investments under a custodian agreement. This helps in minimizing the potential risk of mishandling of physical securities and investor records. However, its role does not include managing investor portfolios. Custodian banks are responsible for the security of securities and assets that have a value of hundreds of millions to billions of dollars, because of this, custodians are mostly large companies with good reputations. Dominant or almost all Custodian Banks offer services such as tax support, foreign exchange management or governance, transaction handling, dividend accumulation, account administration and interest payments. The rates charged by Custodian Banks vary widely, depending on the facilities required by the customer. These companies often charge quarterly custodial fees based on the aggregate value of holdings.
Functions of Custodian Bank
A custodian bank is a company that keeps securities held by individuals and organizations safe. This serves an important purpose because financial securities must be properly cleared and settled, with various regulatory and accounting procedures met. This is often too complicated or time-consuming for investors or traders. Because these companies are responsible for the safety of billions of dollars worth of assets and securities, custodian banks tend to be large, reputable companies. In some cases, custodian banks operate solely in this manner, meaning they do not make deposits or loans in the conventional sense. Instead, they operate solely in a custodian mode. Others offer custodian services as part of the overall banking service package that the bank offers to its customers. Custodians are also appointed to manage the assets of minors, but today’s discussion will focus on custodian banks. As mentioned above, custodian banks do not offer the traditional services that most banks offer, such as mortgage loans, personal loans, branch banking, personal checking accounts, or ATMs. Instead, custodian banks offer:
- Storing assets/valuable securities such as stocks, bonds, commodities such as precious metals and currency (cash), domestic and foreign
- Arrange the settlement of each purchase and sale and delivery in/out of such securities and currencies.
- Collecting information and income from such assets (dividends in case of shares/equities and coupons (interest payments) in case of bonds) and managing related tax withholding documents and foreign tax reclamations
- Managing voluntary and involuntary corporate actions on securities held such as stock dividends, stock splits, business combinations (mergers), tender offers, bond calls, etc.
- Providing information about securities and their issuers such as annual general meetings and related proxies
- Maintain currency/cash bank accounts, deposit securities and withdrawals and manage other cash transactions.
- Conducting foreign exchange transactions
- Often perform additional services for specific clients such as mutual funds; examples include fund accounting, administration, legal, compliance, and tax support services.
The above list is comprehensive and outlines all of the different roles that custodian banks offer their clients. Most of them include housing and handling client assets. Not only do banks offer these services; for example, Charles Schwab also holds the assets of different investment companies. A firm may offer a client the opportunity to invest in a mutual fund, where the investment company does not hold the securities held by the mutual fund. Instead, Charles Schwab holds them for the investment company. It is important to understand the role of a custodian bank; think of it this way. If you buy shares of Apple, you do not physically own the shares due to the electronic nature of the transaction. With the chain of ownership occurring through the brokerage through which you purchased the shares, and Disney, the custodian bank or custodian service will hold the shares for you in case ownership is ever disputed or questioned. In the past, regulatory authorities found it impractical to register every share of stock that ever traded on a public exchange in the name of each specific shareholder, thus creating custodian banks. A great example of how custodian banks function in the retirement account and mutual fund arena. In the case of retirement accounts, the IRS code in the US requires that the custodian hold IRA assets on behalf of the IRA owner. The custodian of IRA assets performs all functions related to managing the assets, such as:
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- custody of assets
- process all transactions
- keep all records
- file reports with the IRS
In the case of mutual funds, the custodian bank holds the securities held by the mutual fund. Most mutual funds use a third-party custodian, as required by the SEC.
As an Asset Storage Institution
Maintaining proper ownership, valuation, accounting, and reporting indications of assets held by plan/fund sponsors or institutional investors
To Process Trades
Track, settle and reconcile assets acquired and disposed of by investors, either directly or indirectly, through delegated authority with the asset manager.
Providing Asset Services
retain all the economic benefits of ownership such as revenue collection, corporate actions, and proxy issues
Storage Costs
Custodian bank fees are certainly different from personal account fees. To ensure security and function as a place to store investor mutual fund assets, custodian banks charge a fee of 0.2 percent to 0.25 percent. Similar to Investment Manager Fees, some custodian banks also determine their fees based on the amount of funds deposited by investors. Custodian bank fees are included in the Net Asset Value (NAV), which information is commonly used by investors in comparing one mutual fund product with another.
10 Examples of Custodian Banks in Indonesia
Here are 10 examples of Custodian Bank lists in Indonesia, according to data from the OJK (Financial Services Authority):
- PT BANK BUKOPIN - CUSTODY, Tbk located at: Oil Center Building JL. MH.Thamrin No. 55
- PT BANK CENTRAL ASIA - CUSTODY, Tbk is located at: Menara BCA - Grand Indonesia 28th Floor, JL. MH. Thamrin NO. 1 JAKARTA 10310
- PT BANK DBS INDONESIA is located at: Plaza Permata, 9th Floor
- PT BANK MEGA - CUSTODY, Tbk is located at: Menara Bank Mega, 16th Floor
- PT BANK NEGARA INDONESIA (PERSERO) - CUSTODY, Tbk: Landmark Tower 1 Building, 19th Floor, Jl. General Sudirman No. 1 Jakarta 12910, Indonesia
- PT BANK RAKYAT INDONESIA (PERSERO) - CUSTODY, Tbk is located at: TREASURY DIVISION, BRI II BUILDING, 3RD FLOOR
- PT Bank HSBC Indonesia is located at: Menara Mulia, 19th floor
- PT Bank Maybank Indonesia Tbk is located at: PLAZA BII, 2ND TOWER, 6TH FLOOR
- PT KEB Hana Bank Indonesia is located at: Mangkuluhur City, Tower One 11th Floor Jl. Jend. Gatot Subroto Kav.1-3
- PT. WEST JAVA AND BANTEN REGIONAL DEVELOPMENT BANK TBK is located at: Taspen Tower, 1st Floor, Jalan Jenderal Sudirman Kav 2
The article above is an explanation of Custodian Banks, hopefully it can help you to understand more about Custodian Banks! Interesting offers for you! Trading starts from 150 K only at GICTrade,
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