Glossary

Correspondent bank

By Fredrik Filipsson, cofounder of Business Bank Index
Reviewed by Morten Andersen
Definition

A correspondent bank is a bank that provides services on behalf of another bank, usually to move money across borders, by holding accounts for it and processing payments when the other bank has no direct presence in the destination country.

Information as of 19 February 2026Last reviewed 19 February 2026

General information, not financial, legal, or tax advice. Verify current terms and eligibility with the provider before applying.

A correspondent bank acts for another bank. When your bank has no branch or direct relationship in the country you are paying, it routes the payment through a correspondent bank that does. This is why an international wire can pass through several banks before it arrives.

How correspondent banking works

A correspondent bank holds deposits for another bank, the respondent, and carries out payments and currency transactions on its behalf. The arrangement relies on two views of the same account. A nostro account, meaning our account with you, is the account the respondent holds at the correspondent in the foreign currency. A vostro account, meaning your account with us, is that same account seen from the correspondent's side. Both labels point to the same pool of funds.

Moving money without moving cash

Payments are passed along over messaging networks such as SWIFT. Each bank in the chain debits and credits accounts on its own ledger, so no physical currency actually moves. The correspondent settles the transaction and reconciles the accounts with the respondent, often deducting a fee for the service.

Why it matters to a business

An international wire may pass through one or more correspondent and intermediary banks, and each can deduct a handling fee, which is why the amount received can be smaller than the amount sent. The number of banks in the route also affects how long the payment takes. Asking your provider which fee option applies, and how many banks are in the chain, helps you anticipate the cost. Fees and routing vary by provider and corridor as of 19 February 2026.

Frequently asked questions

What does a correspondent bank do?
It acts on behalf of another bank, mainly to settle cross border payments and currency transactions, by holding accounts for that bank and processing transfers through networks such as SWIFT when the sending bank has no direct relationship in the destination country.
What is the difference between a correspondent bank and an intermediary bank?
The terms overlap. A correspondent bank holds an ongoing account relationship with another bank, while an intermediary bank is any bank that sits between the sender's and the recipient's banks to pass a specific payment along. In practice a correspondent often acts as the intermediary.
What are nostro and vostro accounts?
They are two views of the same account used in correspondent banking. A nostro account is the account a bank holds with a foreign bank in that country's currency, and a vostro account is that same account seen from the foreign bank's side. They let banks settle foreign currency payments.
Why do correspondent banks reduce the amount received on a wire?
Each correspondent or intermediary bank in the payment chain can deduct a handling fee, so a transfer that passes through several banks can arrive smaller than it was sent. Ask your provider which fee option applies and how many banks are in the route.

Definitions, fees, features, and eligibility change and vary by region. This page was last reviewed on 19 February 2026. Confirm current terms with the provider before applying.

Related terms and guides

Nostro accountGlossary term Intermediary bankGlossary term Cross border paymentGlossary term All glossary termsGlossary Business banking by countryGuide Compare providersBanks