Correspondent banking
Correspondent banking is an arrangement in which one bank holds deposits owned by other banks and provides them with payment and other services. The CPMI calls it an essential component of the global payment system, especially for cross-border transactions.
How it works
The CPMI calls the bank holding the deposits the correspondent and the bank that owns them the respondent. Relationships are often reciprocal, with each bank serving the other in a different currency. In nested correspondent banking, other banks use the respondent's relationship without holding an account with the correspondent themselves.
Payments move by one of two methods. In the serial method, the customer payment message passes through each bank in the chain. In the cover method, the customer message goes straight to the beneficiary's bank while settlement travels separately through the correspondents in a cover message, the MT 202 COV, which on Swift has been the ISO 20022 pacs.009 COV since 22 November 2025. Under the market practice the CPMI described in 2016, intermediaries typically deduct fees from a serial MT 103 but not from an MT 202 COV.
The network has shrunk. BIS research found that the number of active correspondents fell by 20% between 2011 and 2018, with regional declines ranging from 12% in North America to 30% in Latin America. Country corridors fell by 10% over the same period, from 10,800 to 9,800. A complete loss of access is rare, but fewer corridors can mean longer payment chains, and the BIS found that costs are higher in countries with more limited access to correspondent banking.
Example
A UK firm sends $100,000 to its payout partner's bank in Ghana. Its own bank has no dollar account with that bank, so the payment travels through two intermediary banks. If each deducts $25 from a serial payment sent with shared charges, the Ghanaian bank receives $99,950. Treasury records the $50 as a cost and matches the payment on $99,950, not $100,000.
Frequently asked questions
Is a correspondent account the same as a nostro account?
It is the same account seen from two sides. The respondent calls the account it holds with its correspondent a nostro; the correspondent calls it a vostro.
Why do correspondent relationships matter to a payment company that is not a bank?
Your bank and your payout partners rely on them to move currencies they do not clear themselves. Each extra link adds a cut-off time, a possible fee and another point where a payment can be held for compliance review.
Where Polynopsis fits
Polynopsis reads balances held with correspondent banks from their statement files, such as MT940 and camt.053, into the same position as payout partners and wallets.
Compared with
Related terms
Sources
- Correspondent banking (July 2016) · Committee on Payments and Market Infrastructures, Bank for International Settlements
- On the global retreat of correspondent banks, BIS Quarterly Review, March 2020 · Bank for International Settlements
Know where all your money is.
Polynopsis gives cross-border payment teams one live position across every bank, payout partner, exchange and wallet, including money in flight, and warns before a corridor runs dry.
About Polynopsis
Polynopsis is liquidity management software for cross-border payment companies. The name joins poly, many, and synopsis, a seeing together: one live view of money spread across many banks, payout partners, exchanges and stablecoin wallets, including money in flight, with a warning before any corridor runs dry.
Why it is called Polynopsis · About Polynopsis · Glossary · Corridor runway calculator