In the field of finance, depositary agreements are commonly used to facilitate international transactions. A depositary agreement is an agreement between a foreign company and a local bank, wherein the bank acts as the custodian for the company`s assets. These assets can include cash, securities, or other financial instruments.

The purpose of the depositary agreement is to allow the foreign company to access local markets. By working with a local bank, the company can invest in local stocks, bonds, and other financial assets. The bank holds these assets on behalf of the company and provides the necessary services to manage the assets, including collecting dividends and interest payments and handling proxy voting.

One of the key benefits of a depositary agreement is that it can help to simplify the process of investing in foreign markets. For example, a US-based company that wants to invest in Japanese stocks may not have the knowledge or resources to navigate the Japanese market. Through a depositary agreement, the company can work with a local bank in Japan, which can provide the necessary expertise and support to invest in Japanese stocks.

Another benefit of depositary agreements is that they can provide additional protections for investors. For example, if a foreign company issues securities under a depositary agreement, the securities are held in custody by the depositary bank. This means that in the event of a bankruptcy or other adverse event affecting the company, the securities are protected by the depositary bank.

Overall, depositary agreements play an important role in international finance. They allow foreign companies to invest in local markets and provide additional protections for investors. If you`re interested in investing in foreign markets, it`s worth considering the benefits of a depositary agreement and working with a reputable local bank to ensure your investments are managed effectively.