What Is an Agent Bank?

A woman banks on her computer.

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An agent bank is a financial institution that performs specific duties on behalf of another party. This role can involve doing work for an individual or business as well as providing services for one or more financial institutions. There are several possible agent banking arrangements available.

Key Takeaways

  • An agent bank often works on the behalf of other financial institutions, individuals, and businesses.
  • An agent banking agreement along with state and federal regulations can affect the role an agent bank plays in the relationship.
  • Businesses often use investment banks as their agents for securing financing for major projects that warrant funds from multiple lenders.
  • Individuals can use agent banks to conduct everyday transactions such as deposits and withdrawals from the bank holding their accounts.
  • To get compensation, agent banks often receive commissions through fees that other financial institutions, businesses, or individuals pay for their services.

Definition and Examples of Agent Banks

Agent banks act on behalf of other parties in financial matters, and can work in various capacities to meet the needs of the individual, business, or another bank. They offer a variety of services that can help with conducting business both domestically and internationally.

  • Alternate name: Agency bank

For example, agent banks can help businesses gain access to multiple funding sources for expansion or to be able to offer services they could not on their own. Businesses can also consult agent banks to arrange securities transactions.

Financial institutions, on the other hand, may use agent banks to make their services more accessible to customers who may not live near a local branch or be able to visit during regular banking hours. In addition, agent banks can help other banks expand their service offerings, outsource labor-intensive duties, or safely move securities across different countries.


While an agency bank might take deposits from customers as one of its services, the bank that’s the actual account provider continues to maintain the account.

As an individual, you might also use the services of an agent bank that enters an agreement with your regular commercial bank. While the agent bank doesn’t hold your account’s funds, it would have access to the banking network so you could perform various account transactions. The agent’s third-party location could include a convenient place such as a post office or kiosk at a retailer.

How Does an Agent Bank Work?

How an agent bank works depends on the particular type. Some agent banks are simply responsible for conducting account transactions for customers on the holding bank’s behalf, or arranging for loans or credit cards. Others have more complex responsibilities, such as handling the movement of securities overseas or helping with the financial aspects of international mergers.

Since an agent bank can perform many different roles, there will be an agreement between the agent bank and partnering individual, business, or financial institution. This agreement details the particular duties the agent bank will perform and how all the terms will work.

For example, a financial institution using an agent bank to handle customer transactions will specify which types of transactions the agent bank can do on its behalf. The agreement will also spell out the agent bank’s liabilities and requirements for monitoring and reporting to the partnering entity.


Agent banks usually receive a commission for services they provide, such as the arranging of loans and handling of general banking transactions.

In addition, governments may set restrictions on what an agent bank can and can’t do, especially when the agent provides banking services directly to the public. For example, Georgia state regulations require that agent banks use their own employees to provide banking services and that they do not portray themselves as the actual banks with which customers do business. At the same time, the state gives an agent bank permission to handle various transactions ranging from everyday deposits and withdrawals to loan servicing.

Types of Agent Banks

Various entities can serve as agent banks that facilitate securities transfers, provide access to borrowing and investment opportunities, expand potential service offerings, and assist with everyday consumer banking transactions. Some key types of agent banks include:

Investment Banks

An investment bank will commonly serve as an agent bank for a business that needs to borrow money for a large project and needs funds from more than one lender. For example, your business might want to make a major expansion into a foreign country or merge with another company. In this situation, the investment bank could help your business get funding from a group of banks called a syndicate.

The individual lenders will actually provide the funds to your business. However, as the agent, the investment bank typically has a lead role in arranging the loan, sorting out the terms, and handling payments and reporting moving forward. The agent bank receives a commission for its role.


Syndicates are often used when a business needs a very large loan, since individual banks can’t lend more than 15% of their savings or capital.

Retail Agent Banks

A commercial bank may utilize an agent bank to help customers handle everyday banking transactions. Often, a commercial bank desires this arrangement when customers would find it inconvenient to visit a regular branch due to time or distance, so this arrangement is useful in remote areas. The retail agent bank could be located at a business such as a third-party retailer or postal office, or an appointed individual could serve as the agent.

The retail agent bank needs to have the technology and credentials to handle transactions on behalf of the financial institution where the customer has an account. Depending on the agent’s capabilities and the agreement made with the principal bank, customers may be able to use the agent bank for withdrawals, deposits, transfers, and various loan transactions.

Foreign Agent Banks

When investments need to be traded between countries, a custodial financial institution may use one or more agent banks in the target country to facilitate the transaction. These agent banks will act as sub-custodians and guide the custodian bank on how securities settlement works in that location and the local rules associated with trading. The parties lay out rules on expectations for both sides.

As the foreign agent banks usually hold assets, the custodian bank has to ensure that all regulations are followed and that the agent banks are secure and compliant. This can be particularly complex when the foreign agent bank holds different countries’ securities, since various regulations apply. The custodian bank must also come up with rules on continuously monitoring how foreign agent banks perform.

Credit Card Agent Banks

Some agent banks help other financial institutions that wish to offer credit cards using their own branding. In this situation, the issuing bank would handle the application process and collect the payments from customers. Meanwhile, the agent bank would enjoy less risk and responsibility than it would have taking on all the duties in-house.

While it would pay commissions, the agent bank would still financially benefit from the fee income that comes with being able to offer these branded credit cards to customers. The issuing bank would also provide the agent bank with customer support and marketing throughout the relationship.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Comptroller of the Currency Administration of National Banks. "Merchant Processing: Comptroller's Handbook," Pages 16, 22. Accessed Jan. 26, 2022.

  2. Rules and Regulations of the State of Georgia. "Subject 80-1-2 Agency Relationships of Financial Institutions; Bank Service Contracts." Accessed Jan. 26, 2022.

  3. Federal Deposit Insurance Corporation. "§ 32.3 Lending Limits." Accessed Jan. 26, 2022.

  4. Comptroller of the Currency Administration of National Banks. "Merchant Processing: Comptroller's Handbook," Pages 14-17. Accessed Jan. 26, 2022.

  5. TCM Bank. "Business Agent Program." Accessed Jan. 26, 2022.

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