What is the depository activity of the bank?

Recently, many banks provide services for the storage and accounting of the customer's securities. This is the depository activity of credit institutions. And as an object can act securities of documentary and non-documentary forms, emission and non-emission. The main thing is that all of them have legal force and were formalized in accordance with the norms of the current legislation.

Depository activity in the securities market implies the existence of various accounting institutions: those that deal with the storage of documents, and those that would maintain a single register fixing the owners of payment documents. The activities of such organizations can easily confirm the existence or absence of rights to a particular security. There are companies that provide services exclusively for the storage of securities. In this case, there can be no talk about the depositary activity, since it necessarily includes accounting and confirmation of the owner's rights.

In addition, the depositary activity in organizations is constantly improving, for example, a number of additional services accompanying the main activities are being introduced. These include assistance in the sale of securities with the benefit to the owner or control and regulation of the process of paying dividends on shares. The provision of an associated service must be indicated in the contract with the client, which will be evidence of the consent of one party to engage in the specified list of operations, and another to pay for it.

Among the total mass of related services, the most common ones are:

• Account management for transactions with payment documents and control over the movement of funds.
• Making settlements in the transit and currency account, if transactions with securities are conducted in foreign currency.
• Distribution of interest income, for example, dividends on shares.
• Conducting verification of certificates of securities and establishing their authenticity.
• At the request of the client, the collection of these certificates is carried out and their subsequent transportation to the destination.
• If it concerns joint-stock companies, the credit organization can represent the interests of its client at the general meeting of shareholders, and in some cases make decisions that are most beneficial to the client.
• Development of specific measures to maximize the profit of the owner of securities through the effective use of his rights.
• Provision of consulting services in the field of investment activities of the customer and relations with tax authorities.
• Other activities aimed at meeting the requirements of the consumer group and not contradicting the norms of the current legislation.

Depository activity is actively used in the securities market, and the party to the relationship that carries it out is called a depository. It must be a legal entity and have a specialized license that gives the right to conduct a certain type of transactions. Depository activities meet certain requirements, standards and norms that should not be hidden from the public. They are available for inspection to any natural or legal person, since they are provided at the first request of the person.

The client of a company engaged in depositary activities in the language of specialists is called a depositor. Moreover, the bank can also be a depositor in the event that bank securities are kept and accounted for by an outside organization. After all, when a credit institution carries out large-scale operations on the securities market, employees are given a heavy load, which distracts from their main activities. That is why the management team can decide on the expediency of introducing an additional cost item for the services of a third-party organization.