Concentration Bank

A concentration bank is a financial institution that is the primary bank of a specific organization. A concentration bank may also be where the organization conducts most of its transactions. Several organizations use multiple banks but generally deal significantly with one bank (the concentration bank).

An example of a concentration bank can be a company that has multiple chain stores across the country, with each store depositing its cash into local banks. The company can set it up so that these funds are concentrated or deposited into one account, usually called a concentration account, at a concentration bank.

A concentration account is a deposit account that aggregates funds from several locations (e.g. from the national company’s many branches) into one centralized account. Banks may also employ concentration accounts for fund transfers, private banking transactions, trust and custody accounts, and international transactions.

U.S. authorities heavily scrutinize concentration concentration accounts, due to the possibility of money laundering. It can be more difficult to follow a money trail if funds from disparate sources are combined in one central location. The USA Patriot Act recently required banks to establish clearer policies for detecting and reporting suspicious transactions and prohibited customers from moving own their funds into, out of, or through the concentration accounts.

A company with multiple branches may decide to place its funds in a concentration bank to facilitate investment management as well. An investment manager will aims to meet particular investment goals of the company (such as growth or increased liquidity) through a process that may involve asset allocation, financial statement analysis, stock selection, monitoring of existing investments and plan implementation.

Investment management includes ensuring a company's tangible and intangible assets are maintained, accounted for and well-utilized. The global investment management industry in 2015 was worth an estimated $79 trillion in assets under management, as measured by a PricewaterhouseCoopers report in 2017.