An agent bank, also known as an agency bank, is a bank that acts on behalf of another bank or group of banks (syndicate). The term may also refer to a bank that acts on behalf of a person, organization or corporation.
The functions of an agent bank depend on the nature of the agreement made with its clients.
The bank may act as agent for a loan made to one borrower by several lenders – a syndicated loan. It sends interest payments to lenders, and informs all parties on any developments. This type of agent is also known as a lead bank.
The agent bank may take part in the credit card program of another financial institution by issuing credit cards and carrying out other duties.
The term could also refer to a foreign bank doing business in a country on behalf of its parent bank – in such cases it will not accept deposits.
Why have an agent bank?
Companies, individuals or financial institutions may choose to use an agent because they want to work with a bank that can operate internationally, or they simply wish to delegate administrative tasks.
For businesses wishing to expand their operations geographically, using an agent bank that is familiar with how business is done in several locations can be extremely advantageous.
An agent bank can provide people with several types of services, including accessing funds while abroad, and administering their finances so that they can concentrate on other tasks.
According to Cambridge Dictionaries Online, an agent bank is:
“A bank that deals with local business and financial arrangements for a foreign bank,” or “a bank that represents a group of banks in managing large loans that they have made together.”