A depository bank (
U.S. usage) or depositary bank (predominantly
EU usage) is a specialist financial entity which,
depending on jurisdiction, facilitates investment in
securities markets.
Depository banks in the United States
In the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
, a depository is a bank organized in the US which provides all the
stock transfer and agency services in connection with a
depositary receipt program. This function includes arranging for a
custodian to accept deposits of ordinary
shares
In financial markets, a share is a unit of equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers to all of the shares of ...
, issuing the negotiable receipts which back up the shares, maintaining the register of holders to reflect all transfers and exchanges, and distributing
dividend
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...
s in
U.S. dollars
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
.
Depositary banks in the European Union
In the
EU, a depositary is a financial institution which provides
fiduciary
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for exa ...
/custodian services to
Investment Funds authorised to trade in any EU jurisdiction as a
UCITS or
Alternative Investment Fund. Both the UCITS (2009/65/EC) Directive and AIFMD (2011/61/EU) Directives require that authorised investment funds have a depositary appointed to the fund to safekeep the assets of the fund (whether by taking them into custody, or record-keeping and verifying title of them) and oversee the affairs of the fund to ensure that it complies with obligations outlined in relevant laws and the fund's constitutional documents.
Depositaries have been subject to significantly increased regulation in the EU in recent years and the proposed “UCITS V” directive proposes to continue this trend by imposing a “
strict
In mathematical writing, the term strict refers to the property of excluding equality and equivalence and often occurs in the context of inequality and monotonic functions. It is often attached to a technical term to indicate that the exclusive ...
” standard of depositary liability for the loss of fund assets, other than in certain circumstances.
References
{{DEFAULTSORT:Depository Bank
Banking
Legal entities