Why are you highlighting custody agreements as an overlooked risk area
In the financial press the focus is mainly on counterparty risk on bank deposits and obligations pursuant to loans, other financing arrangements, derivative transactions or debt securities. What is often easily overlooked is that similar risks can arise even where assets are custodied with banks.
Why should there be any counterparty risk for custodian agreements
Where the bank is custodian, it assumes responsibility for the safekeeping and administration of deposits and investments. Typically, as custodian, the bank will hold equities, bonds and other forms of investments, as a nominee. It may be surprising to know that in some...