What is the difference between a custodian bank and an investment bank?
What is the difference between a custodian bank and an investment bank Introduction: The Financial Landscape Hello everyone! In today's video, we're going to explore the fascinating realm of banking, focusing specifically on custodian banks and investment banks. While both are integral to the financial ecosystem, they serve distinct purposes. Let's dive in! Custodian Banks: Safeguarding Assets Custodian banks are the guardians of financial assets. They specialize in the safekeeping and administration of securities, such as stocks, bonds, and derivatives, on behalf of institutional investors, including mutual funds, pension funds, and hedge funds. Their primary responsibility is to ensure the physical and digital security of these assets, minimizing the risk of loss or theft. Additionally, custodian banks handle various operational tasks, including settlement, clearing, and corporate actions, streamlining the investment process for their clients. Investment Banks: Facilitating Capital Markets On the other hand, investment banks are the engines that drive the capital markets. They are primarily involved in the creation, underwriting, and distribution of securities. When a company decides to go public and issue shares, it is the investment bank that assists in the initial public offering (IPO), determining the offering price, and finding potential buyers. Investment banks also play a crucial role in mergers and acquisitions (M&A), providing advisory services, conducting due diligence, and facilitating the transaction process.