Subsidiary Bank

AAA

DEFINITION of 'Subsidiary Bank'

A type of foreign bank that is incorporated in the host country but is considered to be owned by a foreign parent bank. The subsidiary bank only needs to operate under the host country's regulations.

INVESTOPEDIA EXPLAINS 'Subsidiary Bank'

One of the drawbacks of operating a subsidiary bank is that the amount of loans that the bank can make is much less than what a foreign branch bank can make. However, one benefit that makes up for that drawback is a subsidiary bank's ability to underwrite securities.

That being said, the type of international banking office that a parent bank chooses to set up would depend on the role that the office holds. For example, if a U.S.-based bank wants to underwrite securities in Canada, the bank should set up a subsidiary bank, whereas if the U.S.-based bank wants to make loans to Canadian companies, the bank should set up a foreign branch bank.

RELATED TERMS
  1. Branch Banking

    Engaging in banking activities such as accepting deposits or ...
  2. Schedule II Bank

    A bank which is a subsidiary of a foreign bank and authorized ...
  3. Foreign Branch Bank

    A type of foreign bank that is obligated to follow the regulations ...
  4. Commercial Bank

    A financial institution that provides services, such as accepting ...
  5. Bank

    A financial institution licensed as a receiver of deposits. There ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital ...
RELATED FAQS
  1. What is the difference between investment banks and merchant banks?

    Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different ... Read Full Answer >>
  2. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
  3. What is the difference between a green field and a brown field investment?

    Green-field and brown-field investments are two different types of foreign direct investment, or FDI. Green-field investments ... Read Full Answer >>
  4. Why is the 1982 AT&T breakup considered one of the most successful spinoffs in history?

    AT&T had a history reaching back to 1885 and, as a government-supported monopoly, was a highly profitable company. Colloquially ... Read Full Answer >>
  5. How do businesses decide whether to do FDI via green field investments or acquisitions?

    When businesses decide to expand their operations to another country, one of the more important dilemmas they can face is ... Read Full Answer >>
  6. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Full Answer >>
Related Articles
  1. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  2. Fundamental Analysis

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
  3. Economics

    What Happens in a Carve-Out?

    A carve-out happens when a corporation isolates part of its business and shares those profits with a third party.
  4. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  5. Economics

    Understanding Green Field Investments

    A green field investment refers to a company, usually a large multi-national corporation, building a new facility in a foreign country.
  6. Economics

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  7. Trading Strategies

    General Electric: Good News/Bad News

    General Electric is generous to its shareholders, but that's not the only factor to consider.
  8. Stock Analysis

    A United Technologies Product: Always Closeby

    If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
  9. Stock Analysis

    How Warren Buffett made Berkshire Hathaway a World-beater

    It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway Inc. (NYSE:BRK.A) doesn’t turn gargantuan profits.
  10. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!