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Correspondant accounts are the accounts of foreign banks to deal with their domestic currencies.
Thro the correspondant accounts, the banks are able to pay others in a certain currency and receive from others.
Correspondent accounts enable financial institutions to provide their Clients a faster and better service. They are “established by a banking institution to receive deposits from, make payments on behalf of, or handle other financial transactions for another financial institution”, as defined by the USA PATRIOT Act. They are primarily used by banks, money remittance businesses and other money services businesses that deal with multiple currencies.
Correspondent accounts are used directly by financial institutions that are making cross-border transactions in a currency not issued in one of those states. These accounts are also used to consolidate payments or deposits before transferring the amounts to another financial institution at a lower fee, negotiated by the two parties.
Another purpose of these accounts is to support emerging and growing banks before they gain access to the SWIFT network. As they might not have access yet to international transfers, they make an agreement and settle their correspondent accounts with domestic banks that can receive international payments for them.
Is that account used by one bank to transact on behalf of another
Correspondent bank's account used to conduct business in foreign countries (foreign purchases), and also act as a domestic bank's agent abroad
Commonly, correspondent accounts are the accounts of foreign banks that require the ability to pay and receive the domestic currency. The accounts allow them to pay others from the account or receive money from others into the account. This allows the bank to offer various services to their customers such as foreign exchange and foreign currency denominated loans and deposits, despite their not having a bank licence for the foreign country in that country's currency.
Such accounts are necessary for international trade that requires people and businesses to pay for things in a currency other than their own. It is impractical to transport large amounts of currency around the world and physically exchange domestic currency for the currency that a customer/supplier demands. Instead, money is taken out of an account at a local bank (which is in local currency) and an equivalent amount of money is put in the customer's or supplier's account at their local bank (in a foreign currency). The money from the buyer's account goes to an internal account of your bank. The money to the customer or supplier comes from an account the buyer's local bank holds with a bank in the supplier's country—the buyer's bank's correspondent account, at their correspondent bank.A financial institution that provides services on behalf of another, equal or unequal, financial institution. A correspondent bank can conduct business transactions, accept deposits and gather documents on behalf of the other financial institution.A correspondent account is an account (often called a nostro or vostro account) established by a banking institution to receive deposits from, make payments on behalf of, or handle other financial transactions for another financial institution.
Correspondent bank is "which the bank has deal with foreign currency on behalf of his clients"
For me, a correspondent bank account is an account (often called a nostro or vostro account) established by a banking institution to receive deposits from, make payments on behalf of, or handle other financial transactions for another financial institution.
A correspondent bank is a financial institution or in layman's term a third-party bank used by the beneficiary bank to facilitate international transfer and settlement of funds.
Well, we can simply that it is the agreement between two bank to work on behalf of each other in as local bank in foreign country. If a customer has account in one country he can receive payments/ receipts in foreign country bank ( corespondent) account as his local bank account.
A Correspondent Bank A/c is used as a mediator between the customer bank account and the receiver of international transfer bank account.
