An agent bank or agency bank is a bank that acts on behalf of another bank or group of banks. We commonly refer to a group of banks as a 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 it makes with its clients.
The bank may act as agent for a loan made to one borrower by several lenders. We call this type of loan a syndicated loan. It sends interest payments to lenders and informs all parties on any developments. We also call this type of agent a lead bank.
The agent bank may take part in the credit card program of another financial institution. The bank may issue credit cards and carry out other duties.
The term could also refer to a foreign bank doing business in a country on behalf of its parent bank. When the bank is doing business abroad on behalf of its parent bank, it will not accept deposits.
Why have an agent bank?
Companies may choose to use an agent because they want to work with a bank that can operate internationally. Additionally, a firm, business, or organization may wish to delegate administrative tasks.
For businesses wishing to expand their operations geographically, using an agent bank makes sense. Having a bank that is familiar with how business is done in several locations can be advantageous.
In fact, for small businesses doing business in remote places, having a good agent bank is crucial.
An agent bank can provide people with several types of services, including accessing funds while abroad. Furthermore, this type of bank can administer 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.”