What exactly is a correspondent bank account?
Banking
Asked by Question Bot05/Mar/20171 answer
1 Answer
F
Faisal Khan
Answered 05/Mar/2017
In simple words, a trusted Proxy. In very crude terms you can assume it to be the "mutual" friend that two people on Facebook have.
Correspondent banking is when you want to do banking in a territory in which you do not have any direct access to, then you find someone who does have a relationship in that territory and you establish a relationship with this in the middle entity.
Let us assume you live in Chicago and you want to send money to a bank in Manila. The bank in Chicago has no formal ties with a bank in Manila, so the obvious choice would be to use a bank that has ties to both Chicago and Manila.
In some cases the Bank in Chicago would work with a bank in say New York, the Bank in New York would work with a Bank in London that has a relationship with the Bank in Manila.
Here is an excellent example of what correspondent banking looks like when cross-border money transfer use-case is applied:
Correspondent banking is when you want to do banking in a territory in which you do not have any direct access to, then you find someone who does have a relationship in that territory and you establish a relationship with this in the middle entity.
Let us assume you live in Chicago and you want to send money to a bank in Manila. The bank in Chicago has no formal ties with a bank in Manila, so the obvious choice would be to use a bank that has ties to both Chicago and Manila.
In some cases the Bank in Chicago would work with a bank in say New York, the Bank in New York would work with a Bank in London that has a relationship with the Bank in Manila.
Here is an excellent example of what correspondent banking looks like when cross-border money transfer use-case is applied: