Safekeeping is where an asset owner elects to place that asset in the care of an Agent, usually a Bank or a Financial Institution and receives an acknowledgement from the Bank as to their "Safekeeping" of that asset. The asset owner may elect to have such an acknowledgement sent to a third party. A fee may be required for these services. The various assets that can be held in such arrangements range from share, stock or bond holdings to Real Estate Titles, and Precious Metals.
Where an acknowledgement is required it is typically referred to as a Safekeeping Receipt.
It is usually a negotiable, bank-issued certificate representing ownership of stock/ securities by an investor outside the country of origin. Eg. An international depository receipt, or IDR, is the non-US equivalent of an American Depository Receipt. These instruments have been used since the 1970's to facilitate international trading in securities. The securities backing the receipt remain in the custody of the issuing bank or a correspondent bank.
A negotiable or non-negotiable bank-issued certificate representing the holding or ownership of an asset, such as art, precious metal, jewelry, mining rights, specific certified rights, everything a bank can hold is also called SKR. In a negotiable form typically issued for cash value market assets, in a no negotiable form for documentary purpose issued without a value assignement, the bank usually certifies what they hold, the terms and conditions of the holding and for whom they are holding, which insurance is covering risks and their own liability towards the beneficiary.
The issuer of a Safekeeping Receipt does not have any financial responsibility for the asset apart from the duty of care in the act of safekeeping. If the owner of the asset, directs that another financial institution be advised of the safekeeping role, and uses such advise to raise a loan against the held asset, it is the responsibility of the asset owner, now borrower, to satisfy all aspects of the debt when required by the lending financial institution.
In the event of default in loan repayment, the holder of the Safekeeping Receipt will request the issuer of the Safekeeping Receipt to forward the held assets to their legal representatives, for them to liquidate the assets. If there is a shortfall after liquidation, the lender will pursue the former asset owner, now borrower for any balance of debt remaining. The institution issuing the Safekeeping Receipt has fulfilled all its obligations by releasing the held documents or goods to the Safekeeping Receipt Holder.
