What do you mean by Custodian? What is a Custodian? Investment Bank function
Summary
TLDRThis video script explains the role of a custodian in the context of investment banking. It uses the analogy of a bank safeguarding cash to illustrate how custodians safeguard investors' financial assets, such as equities and bonds. The custodian's primary function is record-keeping of all transactions, including buy and sell activities, as well as corporate actions like dividends and stock splits. This ensures accurate balance reporting, which instills trust in clients that their assets are being properly managed, similar to how individuals trust banks with their cash.
Takeaways
- 🏦 A bank's primary role is to safeguard cash, providing a sense of security to its customers through accurate balance reporting.
- 🔍 Customers verify their bank's safeguarding of cash by checking their balance through ATMs, customer care, or online statements.
- 📊 The bank's record of deposits, withdrawals, interest, and charges helps customers trust the accuracy of their account balances.
- 📋 The term 'custodian' is derived from 'custody', which implies safeguarding or taking care of something valuable.
- 💼 A custodian's role is to safeguard investors' financial assets, such as equities, bonds, and securities.
- 📝 Custodians maintain accurate records of all transactions, including buy and sell activities, to ensure the integrity of investors' accounts.
- 🏢 International investment banks often act as custodians for their clients, especially for those operating in foreign markets.
- 📈 Corporate actions like dividends, stock splits, and bonus issues are also recorded by custodians to reflect in the investors' accounts.
- 🌐 Custodians provide a crucial service in the global financial ecosystem, ensuring the proper management and protection of financial assets.
- 📊 The accuracy of a custodian's record-keeping is vital for investors to trust that their assets are being safeguarded correctly.
- 🙏 The analogy of a bank and its services helps explain the custodian's role in safeguarding financial assets, emphasizing the importance of transparency and reliability.
Q & A
What is the role of a custodian in the context of investment banking?
-A custodian in investment banking is responsible for safeguarding investors' financial assets, such as equities, bonds, and securities, through accurate record-keeping of all transactions and corporate actions.
Why is record-keeping important for a custodian?
-Record-keeping is crucial for a custodian because it allows them to accurately track all transactions, including buy and sell activities, as well as corporate actions like dividends, stock splits, and bonus issues, ensuring the correct balance is maintained.
How do investors know if their assets are being safeguarded properly by a custodian?
-Investors can verify if their assets are being safeguarded properly by checking their demat account, where all transaction records and corporate actions are detailed, allowing them to confirm the accuracy of their balance.
What are some examples of international investment banks that act as custodians?
-Examples of international investment banks that act as custodians include JP Morgan, Northern Trust, BNY Mellon, and Morgan Stanley.
What is the analogy used in the script to help understand the concept of a custodian?
-The script uses the analogy of a bank to help understand the concept of a custodian. Just as a bank safeguards cash and provides statements to its customers, a custodian safeguards financial assets and maintains records for investors.
How does a bank demonstrate that it is safeguarding a customer's cash?
-A bank demonstrates that it is safeguarding a customer's cash by providing accurate balance information through ATMs, customer care, or online statements that detail all deposits, withdrawals, and any interest or charges.
What is the term 'custody' related to, and what does it imply?
-The term 'custody' is related to the concept of safeguarding. It implies the responsibility of protecting and overseeing someone's assets or property.
What are corporate actions in the context of financial assets?
-Corporate actions refer to events initiated by a company that may affect its shareholders, such as dividend payments, stock splits, bonus issues, and rights issues.
How do custodians maintain the correct balance for investors?
-Custodians maintain the correct balance for investors by recording all transactions, including buy and sell activities, and incorporating the effects of corporate actions into the account balances.
What is the significance of a demat account in the context of a custodian's responsibilities?
-A demat account is significant because it is where all the details of an investor's transactions and corporate actions are recorded and maintained by the custodian, allowing the investor to verify the safeguarding of their assets.
Why are international investment banks important for their clients abroad?
-International investment banks are important for their clients abroad because they provide specialized services such as custodianship, which ensures the safekeeping and accurate management of their clients' financial assets in foreign markets.
Outlines
🏦 Understanding the Role of a Custodian in Investment Banking
This paragraph introduces the concept of a custodian within the context of investment banking. The speaker aims to clarify the term 'custodian' by comparing it to the role of a bank in safeguarding cash. The custodian's role is likened to that of a bank, which maintains the correct balance by recording all deposits, withdrawals, and other financial activities. The custodian, in this case, is responsible for safeguarding investors' financial assets, such as equities and bonds, through meticulous record-keeping of all transactions including buy and sell activities, as well as corporate actions like dividends and stock splits. The analogy is used to emphasize the trust that clients place in custodians to accurately maintain and report on their financial holdings.
Mindmap
Keywords
💡Custodian
💡Investment Bank
💡Custody
💡Record Keeping
💡Financial Assets
💡Equities
💡Bonds
💡Securities
💡Corporate Actions
💡Demat Account
💡Balance
Highlights
The video explains the term 'custodian' in the context of investment banking.
Investment banks act as custodians, safeguarding investors' financial assets.
Major international investment banks in India include JP Morgan, Northern Trust, BNY Mellon, and Morgan Stanley.
Custodians perform the function of safeguarding cash, similar to banks.
Customers trust banks through checking balances and transaction records.
Custodians maintain records of all transactions, including buy and sell activities.
Corporate actions such as dividends, stock splits, and bonus issues are recorded by custodians.
Custodians ensure the accurate balance of investors' accounts through meticulous record-keeping.
Investors can verify the safeguarding of their assets by checking their demat accounts.
The role of a custodian is to provide assurance to investors about the security of their financial assets.
International investment banks offer custodial services to their clients abroad.
The concept of custody is central to the role of a custodian in investment banking.
Custody involves safeguarding, which is the core responsibility of a custodian.
Financial assets include equities, bonds, and securities that custodians safeguard.
Record-keeping is a key function performed by custodians to track all transactions.
Custodians provide transparency to investors by recording and displaying all relevant financial activities.
The analogy of a bank helps to understand the custodian's role in safeguarding financial assets.
Transcripts
uh I'm going to
explain the term custodian in this video
custodian uh you know uh Investment Bank
plays many roles so one of their role is
of custodian so what do you mean by
custodian that's what I'm going to
explain here see there are many
International Investment banks in India
like JP Morgan Northern Trust bny Milan
Morgan Stanley so there are many
investment banks around like Barclays
many many around
and mostly you know they do the work of
custodian so that's what I'm going to
explain over here now before we
understand the term custodian I need to
tell you about bank with the analogy of
Bank it will be easier to understand now
when I say a bank and what is your
expectation from your bank what will be
your answer your answer would be that
you expect your bank to safeguard your
cash safeguarding cash now how do they
attain this objective of safeguarding
cash or how how do you know that the
bank is safeguarding your cash say for
example you have deposited uh some cash
or you have withdrawn some cash from
your bank account so how do you know
that the bank is safeguarding your cash
you will come to know that the bank is
safeguarding your cash when you check
the ATM and it shows the right balance U
you can check through ATM or you can
call up their customer care or you can
check online uh the statement and in
that statement you know you will clearly
be mentioned about the deposit that you
have done uh withdrawal that you have
done and then it will also tell you the
balance so that means it is telling you
the right balance uh why right balance
because it is also telling you how that
balance is coming up okay so all the
deposits also will be shown all the
withdrawals will be shown and then if at
all you got any interest additional
interest or any charges leved everything
will be shown and then they will tell
you the balance that's when you trust
that you know the bank is safeguarding
your cash correctly similar work is done
by custodian now when I say custodian
what comes to your mind custodian is
coming out of the word custody custody
means what when I say custody what comes
to your mind custody also refers to
safeguarding only so custody also refers
to safeguarding so custodian is doing
the work of safeguarding
investors investors Financial
assets okay investors Financial assets
Financial assets means equities you know
bonds Securities so custodian is doing
the work of safeguarding investors
Financial assets how do they do this
work by record keeping all the
transactions by record keeping by record
keeping all the
transactions so the record keeping is
the keyword over here by record keeping
all the
transactions okay so what do you mean by
all the transactions an investor is
doing you know U buy activities sell
activities so all such transactions will
be recorded by the custodian and that's
how they will be able to show the right
balance plus any corporate actions that
is taking place so buy Plus sell plus
corporate actions so what do you mean by
corporate actions example like dividend
company is paying uh dividend or bonus
stock split all such corporate actions
will also be recorded by the custodian
and that's how they will be able to
maintain the right balance so whenever
whenever your client check his uh you
know account your demat account where
all these details will be given so then
he believes that you know his account is
is being safeguarded properly fine so
Bank does the work of safeguarding cash
custodian does the work of safeguarding
uh uh safeguarding investors Financial
assets so most of the investment banks
that you see around International
Investment Banks they do this work only
uh in India for their clients abroad all
right thank you for your time thanks a
lot
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