Consortium Bank

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. Insurance Consortium

    A group of businesses or organizations that join together to ...
  3. Loan Participation Note - LPN

    A fixed-income security that permits investors to buy portions ...
  4. Agent Bank

    A bank that acts in some capacity on behalf of another bank. ...
  5. Business Banking

    A company's financial dealings with an institution that provides ...
  6. Subsidiary Bank

    A type of foreign bank that is incorporated in the host country ...
Related Articles
  1. Managing Wealth

    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.
  2. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  3. Investing

    What is a Bank?

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

    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.
  5. 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.
  6. Markets

    What is a Syndicated Loan?

    A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
  7. Managing Wealth

    Banking Stress Tests: Would Yours Pass?

    In weaker economic times, banks may be tested by the government to see how safe they are.
  8. Investing

    Up-to-Six-Figure Loans a Business Can Get – Fast

    The banking industry has invested a lot of money into shortening loan approval times from a few weeks to a few minutes, but should you dive in?
  9. Markets

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  10. Trading

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
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 economic indicators are important to consider when investing in the banking ...

    Find out which economic indicators are most useful for investors in the banking sector, especially those influenced by central ... Read Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center