Custody and trust services: How technology has changed risk information processing

Custody and trust are the principal bank fiduciary services - the business of safekeeping. The difference between the two is that a custodian acts as an agent, while the trustee acts as a principal. To state it differently, a custodian is responsible for the safekeeping of assets, while the trustee...

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Bibliographic Details
Published in:Journal of retail banking services : JRBS 1999-07, Vol.21 (2), p.43
Main Author: Orlow, Daniel K
Format: Article
Language:English
Subjects:
Bank technology
Banking industry
Capital markets
Central banks
Clearance & settlement
Costs
Custodian accounts
Custodians
Effects
Efficient markets
Gold
Information processing
Infrastructure
Investment banking
Risk
Securities markets
Stock brokers
Studies
Technological change
Treasuries
Trust companies
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Summary:Custody and trust are the principal bank fiduciary services - the business of safekeeping. The difference between the two is that a custodian acts as an agent, while the trustee acts as a principal. To state it differently, a custodian is responsible for the safekeeping of assets, while the trustee is responsible for the safekeeping of value. Custody and trust services are complementary - indeed, linked - services due to the combination of technology and the increasing denomination of wealth in the form of various liquid market assets such as equity and fixed income securities. These forces are imposing fundamental changes in the custody and trust businesses, as high costs of technology prove to be both a barrier to entry and a formidable competitive pressure. Electronics and the use of clearinghouses have resulted in two important benefits. First, the overall market has improved, as the electronic transfer of ownership is less risky and more efficient than paper. Second, electronic securities processing fosters market efficiency by reducing transaction costs and increasing investor security. However, it is expensive, and only the capital markets of countries that can afford it gain this benefit.
ISSN:0195-2064