A custody network is the group of agent banks and depositories through which a provider of global custody serves its clients in many countries. No single bank is a direct member of every national settlement system, so the global custodian appoints a local agent in each market, either one of its own branches or an outside bank offering local custody. That agent holds the assets under a sub-custody agreement, settles trades in the local depository, collects income and passes on market information.
Managing the network is a function in its own right. A network management team selects agents through due diligence on their financial strength, controls, asset segregation and legal environment, and then monitors them through service reviews, questionnaires and site visits. For regulated funds, the depositary's liability for assets lost by a sub-custodian makes the quality of the network a direct concern, and it shapes the custody chain and custody risk borne by investors.