How are bank custodians regulated?

National bank's and federal savings association's (collectively, banks) custodians are regulated by the Office of the Comptroller of the Currency. Custody is a volume-driven, transaction-processing business, and much of the risk associated with it is operational in nature. For this reason, strong operational controls (separation of duties, dual control, and accounting controls) are essential to effectively manage operational risk. The Comptrollers Handbook for Custody Services outlines various risk management systems expected of banks custodians and in their selection of sub-custodians. These include operational controls, account acceptance and monitoring, management information systems, and board and management supervision.

July 2019