Correspondent banking
A bank in a foreign country that offers banking facilities to the customers of a bank in another country. These arrangements are usually the result of agreements, often reciprocal, between the two banks. The most frequent correspondent banking facilities used are those of money transmission [Law, p. 81]. A bank account is conducted by a UK bank with a bank in another country, usually in that country's currency [Law, p. 82]. In correspondent banking, an account is held by one bank on behalf of another bank (the “customer bank”); the customer bank regards this account as its “nostro account” [Glossary of terms related to payment, clearing, and settlement systems, p. 16]. An arrangement whereby one bank (the settlement or service-providing bank) makes or receives payments (potentially performing other banking services in addition) on behalf of another bank (the customer or user bank) [Glossary of terms related to payment, clearing and settlement systems, p. 7]. In correspondent banking, an account held by a customer bank on the books of another bank acts as a service provider. The other bank regards this account as a “loro account” [Glossary of terms related to payment, clearing, and settlement systems, p. 19].
European Central Bank. (2009). Glossary of terms related to payment, clearing and settlement systems.
Law, J. (2018). A Dictionary of Finance and Banking (6 ed.) Oxford: Oxford University Press.
Law, J. (2016). A Dictionary of Business and Management (6 ed.) Oxford: Oxford University Press.