Nostro account
Nostro account means an account a bank holds with another bank, usually abroad and in foreign currency. Nostro is Latin for 'ours': the owner sees it as 'our account with you'.
How it works
Correspondent banking relies on reciprocal accounts between banks. The IMF describes a nostro as a reporting bank's account with another bank. Foreign-currency payments settle by debiting or crediting these balances. The same account is a vostro, or loro, from the other bank's side.
Cross-border payment companies often use the term loosely for their own foreign-currency accounts at partner banks. Balances must be held in each currency and market served. That spreads liquidity thinly across many accounts. The CPMI notes that holding liquidity in several currencies across countries makes cross-border payments more expensive.
Pitfalls include idle balances in low-volume currencies and late visibility of incoming credits. Another is reconciling against statements that arrive a day late. Daily statements from each correspondent support accurate positioning.
Example
Illustrative example: A firm holds €3,000,000 in a euro nostro but needs only €1,800,000 for a typical week. The surplus is €1,200,000. Moving that surplus to a busier corridor would reduce new funding needs there by €1,200,000.
Frequently asked questions
What is the difference between nostro and vostro?
They are the same account seen from two sides. The bank that owns the funds calls it a nostro, 'our account with you'. The bank holding the account calls it a vostro, 'your account with us'.
Can a non-bank payment firm have a nostro account?
Payment firms often hold foreign-currency accounts at banks and call them nostros informally. Strictly, the term comes from interbank correspondent relationships. What matters is that statements, cut-offs and terms support your liquidity plan.
Related terms
Sources
- Balances on nostro and vostro accounts (from IMF External Debt Statistics: Guide for Compilers and Users) · UN ESCWA, citing the International Monetary Fund
- Correspondent banking · ACT Wiki, Association of Corporate Treasurers
- Liquidity bridges across central banks for cross-border payments · Committee on Payments and Market Infrastructures, Bank for International Settlements
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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.