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.

BREAKING DOWN '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. Foreign Branch Bank

    A type of foreign bank that is obligated to follow the regulations ...
  2. International Banking Act of 1978

    Federal banking legislation that put all domestic bank branches ...
  3. Bank

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

    A company whose voting stock is more than 50% controlled by another ...
  5. Securities Subsidiary

    A company that is controlled by a large bank or financial holding ...
  6. Limited Service Bank

    Any type of banking business facility that is located separately ...
Related Articles
  1. Small Business

    Explaining Affiliate, Associate And Subsidiary

    Affiliate, associate and subsidiary are all terms referring to the degree of ownership a parent company holds in another company.
  2. Small Business

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  3. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  4. 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.
  5. Insights

    The World's Top 10 Banks

    Learn more about the world's largest banks and how more financial power shifts eastward as China is home to four of the world's largest banks.
  6. Insights

    The 3 Biggest Canadian Banks (RY, TD)

    Examine some of the largest banks in Canada, which also rank among the largest and most important banks in the industry worldwide.
  7. Insights

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  8. 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.
RELATED FAQS
  1. 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. Read on to find ... Read Answer >>
  2. 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 Answer >>
  3. Are there any practical differences between a wholly owned subsidiary and a regular ...

    Explore the real, practical differences between a wholly owned subsidiary and a regular subsidiary. Local conditions determine ... Read Answer >>
  4. 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 >>
  5. 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 >>
  6. What is the difference between a subsidiary and a sister company?

    Discover the differences between subsidiary companies and sister companies, and understand how both are related to parent ... Read Answer >>
Hot Definitions
  1. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  2. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  3. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  4. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  5. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  6. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
Trading Center