This is a guide to Nostro Account. Here we also discuss the definition and features of nostro account along with advantages and disadvantages. You may also have a look at the following articles to learn more —. Submit Next Question. By signing up, you agree to our Terms of Use and Privacy Policy. Forgot Password? This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy.
By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy. It is the account which is held by a foreign bank with a domestic bank in domestic currency. Notice that an account which is Nostro for one bank is Vostro for another. In that case, it is a Loro account for PNB. It is like a third party account.
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The vostro account is held in the currency of the country where the money is on deposit. Let's look at an example. GTBank, a Nigerian bank, gets a lot of money sent to its customers at home from the United States in the form of remittances. This way, money received by U. SWIFT refers to the Society for Worldwide Interbank Financial Telecommunications, a member-owned cooperative that offers safe and secure financial transactions for its members.
From GTBank's perspective, its U. For both nostro and vostro accounts, the domestic bank i. Nostro accounts with debit balances are considered cash assets. Contrarily, vostro accounts with a credit balance are considered liabilities. European Central Bank. Southern Illinois University Carbondale. Accessed March 16, Board of Governors of the Federal Reserve System. Guarantee Trust Bank. International Monetary Fund. International Monetary Fund, K Singh. Discovery Publishing House, Corporate Finance.
Your Practice. Popular Courses. Personal Finance Banking. What Is a Nostro Account? Key Takeaways Nostro accounts simplify the process of exchanging and trading in foreign currencies. Major examples of convertible currencies are the U. The bank that is holding a nostro or vostro account may be called the "facilitator" bank. Nostro accounts are not the same as standard demand deposit accounts because these types of accounts are denominated in foreign currencies.
Related Terms Key Currency A key currency is a currency with a relatively stable value that is used as a benchmark for international contracts, trade, and foreign exchange. What Is Currency Internationalization? Currency internationalization is the widespread use of a currency outside its country of issue, including for transactions between nonresidents. Vostro Account A vostro account is an important part of correspondent banking in which a foreign bank provides financial services on behalf of a domestic bank.
Interbank Deposits In an interbank deposit, one bank holds funds on behalf of another bank in an arrangement that requires both banks to hold a due to account for the other. The USD is the abbreviation for the U.
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