The Clearing House (TCH) white paper, The Custody Services of Banks, discusses the services provided by bank-chartered custodians, their relationships with financial market utilities (FMUs), and describes the different risks associated with custody services in comparison to those associated with other banking activities. Custody services — broadly characterized as the safekeeping and servicing of an investor’s assets — are a unique and critical part of the global financial market. These services facilitate client access to and participation in the global financial ecosystem, which includes asset managers, broker-dealers, and FMUs. In providing such services, custodians help to connect investors and enable capital to be deployed efficiently, thereby helping to support overall economic growth and the accumulation of retirement and other long-term savings.
The white paper highlights the important role that bank-chartered custodians play in the system for safekeeping, clearing, and settling securities. The services provided by these custodians facilitate client access to and participation in global financial markets. The white paper also describes the range of administrative services related to clients’ assets that such custodians provide. These services are critical to the efficient functioning of financial markets, and, in fact, the use of these custody services is often required by law or regulation in order to protect investors from potential misappropriation of their assets by funds and other vehicles in which they have invested.