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. International Banking Act of 1978

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

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

    Any type of banking business facility that is located separately ...
  4. Securities Subsidiary

    A company that is controlled by a large bank or financial holding ...
  5. Branch Banking

    Engaging in banking activities such as accepting deposits or ...
  6. Double Leverage

    When a bank holding company conducts a debt offering to acquire ...
Related Articles
  1. 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.
  2. 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.
  3. 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.
  4. Investing

    Introduction To The Chinese Banking System

    As China steps into a greater role in the global economic system, their banking system continues to evolve.
  5. Personal Finance

    How Will Bank Regulation Affect British Banks?

    We look at the proposed changes to Britain's banking system, and see whether it will be able to stay competitive.
  6. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  7. Investing

    How Bank of America Holds 1/8 of All U.S. Deposits

    Bank of America isn't America's central bank, but given its size and spread, you could be forgiven this misapprehension.
  8. Personal Finance

    How Americans Can Open a Bank Account In Thailand

    Have your paperwork in order and be sure to shop around.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  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 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. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
Hot Definitions
  1. Short Covering

    Short covering is buying back borrowed securities in order to close an open short position.
  2. Covariance

    A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns ...
  3. Liquid Asset

    An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
  4. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  5. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  6. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
Trading Center