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. Commercial Bank

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

    A bank that acts in some capacity on behalf of another bank. ...
  5. Schedule I Bank

    A Canadian financial institution regulated under the Federal ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
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. 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 >>
  6. 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 >>
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. 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.
  3. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  4. 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.
  5. Economics

    What is a Spinoff?

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

    General Electric: Good News/Bad News

    General Electric is generous to its shareholders, but that's not the only factor to consider.
  7. 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.
  8. 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.
  9. 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.
  10. Investing News

    This Company Is No Mickey Mouse Operation

    With its famous history that's become part of popular culture, and the instantly recognizable silhouette in its logo, The Walt Disney Co. is only an animation studio in the same way that Johnson ...

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
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!