DEFINITION of 'Consortium Bank'

A subsidiary bank created by numerous banks. A consortium bank is created to fund a specific project (such as providing affordable homeownership for low- and moderate-income home buyers) or to execute a specific deal (such as selling loans in the loan syndication market).

The consortium leverages individual banks' assets to achieve its objectives. All member banks have equal ownership shares – no one member has a controlling interest. After the bank's objective is met the consortium typically dissolves.

BREAKING DOWN 'Consortium Bank'

Consortium banks originated in the early 1960s and are predominantly found in Europe. They were originally created to enable smaller banks to participate in international banking activities. Consortium banks are not as active as in the past; however, examples can still be found both in the U.S. and overseas. Member banks can be headquartered in different countries.

RELATED TERMS
  1. Consortium

    A group made up of two or more individuals, companies or governments ...
  2. Bankers' Bank

    A special type of bank that is created by a group of banks. Bankers' ...
  3. Bank

    A financial institution licensed as a receiver of deposits. There ...
  4. Loan Syndication

    The process of involving several different lenders in providing ...
  5. Limited Service Bank

    Any type of banking business facility that is located separately ...
  6. Competitive Bid Option

    A form of the commercial loan syndication where banks submit ...
Related Articles
  1. Insights

    Peer-to-Peer Lender Prosper To Sell $5 Billion In Loans

    Americas first peer-to-peer lender lands big deal with consortium of investors.
  2. Personal Finance

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  3. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  4. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  5. Personal Finance

    Banking Has Changed: What Does It Mean For Consumers?

    Banks have long been leading spenders on technological innovations. Learn the key changes in the banking industry and what institution is right for you.
  6. Investing

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  7. Financial Advisor

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
RELATED FAQS
  1. What is the difference between loan syndication and a consortium?

    Learn about consortiums and loan syndications, two types of multiple banking arrangements designed to finance transactions ... Read Answer >>
  2. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
  3. How risky is a syndicated loan for the lender?

    Read about risks associated with the syndicate loan market, including the problems of adverse selection and asymmetric information ... Read Answer >>
  4. Who generally structures a syndicated loan?

    Learn what syndicated loans are, including how they are structured and administrated, usual payment terms and costs associated ... Read Answer >>
  5. Under what circumstances might a syndicated loan be arranged?

    Learn about the types of syndicated loans, why some lenders choose to establish or join a syndicate, and why some borrowers ... Read Answer >>
  6. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
Trading Center