What is a Sub Account
A sub account is a segregated balance of funds (account) for which the bank acts on behalf of the account holder. Such accounts operate under very strict guidelines, as funds can only be accessed in accordance with the terms of a Power of Attorney agreement approved and executed by the bank. The deposited funds are not bank assets.
At the most basic level, a sub-account can be thought of as an account within an account. Entities set up sub-accounts for a variety of book keeping and administrative purposes.
BREAKING DOWN Sub Account
A sub account is often used to compartmentalize larger accounts, thereby allowing for better tracking of various budget details and expenses. For example, a company might set up sub-accounts for each of its departments for ease of record keeping.
Sub-accounts are a feature of robust financial systems. They offer users more reporting options and other managerial benefits. Banks, fintech innovators, and capital markets entities are constantly finding new ways to utilize sub-accounts for their clients.