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. Insurance Consortium

    A group of businesses or organizations that join together to ...
  2. Bank

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

    A type of foreign bank that is incorporated in the host country ...
  4. Lead Bank

    A bank that oversees the arrangement of a loan syndication. The ...
  5. Commercial Bank

    A commercial bank is a type of financial institution that accepts ...
  6. Bankers' Bank

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

    Intel, Toyota and Others Form Self-Driving Car Consortium

    The consortium aims to define new network architectures for the self-driving car ecosystem.
  3. Personal Finance

    Retail Banking vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking refers to the aspect of banking that deals with corporate customers.
  4. 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.
  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. 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.
  7. Insights

    The Role of Commercial Banks in the Economy

    We interact with commercial banks daily to carry out simple financial tasks. That said, the function and creation of a commercial bank is anything but simple.
  8. Investing

    Banking Stress Tests: Would Yours Pass?

    In weaker economic times, banks may be tested by the government to see how safe they are.
  9. Personal Finance

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
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 banking sector?

    Why the banking sector is a vital industry, what it does to drive economic growth and examples of companies in this sector. Read Answer >>
  3. What is considered a reasonable interest rate for a syndicated loan?

    Discover how syndicated loans work, why they are beneficial for businesses, and what is considered a reasonable interest ... Read Answer >>
  4. What developed countries have the highest concentration in the banking sector?

    Learn about the developed countries that have the greatest concentration in the banking sector and the most important emerging ... Read Answer >>
  5. How does the deposit multiplier affect a bank's profitability?

    Find out how a deposit multiplier affects bank profitability, how it increases the supply of money in the economy and why ... Read Answer >>
Trading Center