Vostro account
Vostro account means an account a bank maintains on its own books for another bank. Also called a loro account, it is 'your account with us' from the holding bank's side.
How it works
The IMF describes a vostro as another bank's account with the reporting bank. The correspondent holding the vostro processes payments in its local currency for the foreign bank. The Association of Corporate Treasurers notes correspondents may also call this a loro account.
For cross-border payment firms, vostro balances matter when a partner bank holds your funds in its local currency. Your nostro is their vostro. The holder's books, not yours, decide what is available to pay out.
Pitfalls include assuming credits are usable before the holder posts them, and mismatched dates between the two ledgers. Reconcile vostro statements against your own ledger daily. Differences usually stem from timing, fees or FX conversion.
Example
Illustrative example: A Kenyan bank holds a vostro for a UK payment firm with KES 50,000,000. The firm pays out KES 20,000,000 and wires a KES 30,000,000 top-up that posts the next day. End-of-day available balance is KES 30,000,000. It rises to KES 60,000,000 once the top-up posts.
Frequently asked questions
Why does our ledger differ from the partner's vostro statement?
Common causes are timing, unbooked fees and FX conversions recorded at different rates. A credit you sent may also post on a later value date. Reconcile item by item and age any open differences.
Who controls the funds in a vostro account?
The holding bank maintains the ledger and posts debits and credits. The account owner directs payments under the account agreement. That is why the holder's statement decides what is available.
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
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