In the most basic sense of the term, A corporate trust is a

trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...

created by a

corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...

. The term in the United States is most often used to describe the business activities of many financial services companies and banks that act in a

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 examp ...

capacity for investors in a particular security (i.e. stock investors or bond investors). For example, instead of borrowing funds from a bank, a company might borrow funds from the general public in the form of a

bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemica ...

. When a bank lends money to a company, it may often inspect the company's

financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

s to ensure that the company follows the rules (known as covenants) of the loan agreement, and may also attempt to negotiate a settlement if the company has problems and stops repaying its loan. In the situation of a public bond issuance (the company borrowing from anyone in the general public who chooses to lend the funds), there would be no one clear person who would be capable to monitor the loans on their own, and the investors would find it difficult to agree and communicate their agreement to the company to settle any problems with the loan repayments. Therefore, they agree as a condition of their bond borrowing to appoint a financial institution, known as a "corporate trustee", to be the responsible party for monitoring compliance with the loan terms, acting in interests of the general public who have purchased the bond. Another aspect of this service, which is often performed by a different party, is the distribution of the repayment from the company to the bondholders, this function is known as a "paying agent". In fact, modern bonds often appoint many different financial institutions to have special roles, based on their area of expertise (such as corporate trustee with an expertise in bankruptcy who is only called in if the company stops paying back the bond). Financial institutions receive fees for their services. Large corporate trust providers include Zions Bank,

BOK Financial Corporation BOK Financial Corporation — pronounced as letters, "B-O-K" — is a financial services holding company headquartered in Tulsa, Oklahoma. Offering a full complement of retail and commercial banking products and services across the American Mid ...

, U.S. Bank,

Citi Citigroup Inc. or Citi (stylized as citi) is an American multinational investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking giant Citicorp and financial conglomer ...

Deutsche Bank Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...

The Bank of New York Mellon The Bank of New York Mellon Corporation, commonly known as BNY Mellon, is an American investment banking services holding company headquartered in New York City. BNY Mellon was formed from the merger of The Bank of New York and the Mellon Finan ...

Wells Fargo Wells Fargo & Company is an American multinational financial services company with corporate headquarters in San Francisco, California; operational headquarters in Manhattan; and managerial offices throughout the United States and intern ...

One Investment Group
and BNP Paribas Securities Servicesbr>

Reasons

A corporation with little or no financial expertise may seek the services of a financial institution (often a corporation as well) through the creation of a corporate trust. By doing so, they are entrusting the finances of their corporation to that particular financial institution.

Services offered

Corporate trust providers offer a wide range of services, which include but are not limited to: *

Escrow An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacti ...

services *

Public finance Public finance is the study of the role of the government in the economy. It is the branch of economics that assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achiev ...

Project finance Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equi ...

* Corporate finance *

Money market The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. As short-term securities became a commodity, the money market became a compon ...

services * Loan agency and administration services * Structured finance * Document custody services

References

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