Correspondent Banks (2024)

FAQs

What is a correspondent bank? ›

A correspondent bank is an authorized financial institution that provides services on behalf of another financial institution. Correspondent bank's services may include funds transfer, settlement, check clearing, and wire transfers.

Correspondent banking is a partnership between two banks, often from different countries, where one bank provides services on behalf of another bank. In this arrangement, the bank offering the services is called the "correspondent bank," while the bank receiving them is the "respondent bank."

A correspondent bank is a go-between for two different respondent banks in an international financial transaction. A beneficiary bank is the bank that receives money from a sender bank through a third-party intermediary bank.

A person or entity has an account at an issuing bank. The issuing bank then uses a correspondent or intermediary bank to complete the process of moving funds to a beneficiary bank. In some countries, correspondent banks are simply a type of intermediary bank.

JPMC hereby certifies on behalf of the Foreign Banks that they do not use any Correspondent Account with a Covered Financial Institution to indirectly provide banking services to any foreign bank that does not maintain a physical presence in any country and that is not a regulated affiliate.

As a leading Correspondent and Housing Finance Agency (HFA) lender, U.S. Bank can guide you through change, blending what works in mortgage lending with what's to come.

A correspondent bank is a third-party financial institution that acts as an intermediary between domestic and international banks. Correspondent banks effectively act as an agent of a foreign bank to conduct business transactions with the domestic bank on its behalf.

Risks associated with correspondent banking

Correspondent banks may have no pre-existing relationships with parties with which the respondent transacts, making them vulnerable to corruption and money laundering.

High fees: Correspondent banking relationships can involve high fees, particularly for small and medium-sized financial institutions. Complexity: Correspondent banking relationships can involve multiple parties, making it difficult to manage risks and ensure compliance.

Example. A Dutch oil company is a customer of ING in Amsterdam, and sells a cargo of 500,000 barrels of oil for $40 million to a Swiss trading company who is a customer of Credit Suisse. ING Amsterdam holds its dollars at Bank of America (BofA) and Credit Suisse holds its dollars at The Bank of New York Mellon (BNY).

How do I know the correspondent bank? ›

1. Letters between the bankers and their clients 2. Letters from one bank to another 3. Letters between the head office and the branch office.

The originator bank charges a senders fee to their account, while the beneficiary pays the intermediary fees. Other charges can also be levied by the beneficiary bank. Usually, the intermediary charges are automatically deducted from the amount transferred.

When making International Money Transfers (IMTs), we use correspondent banks to help move money between countries to enable funds to be received by the beneficiary bank (the recipient's bank). These beneficiary banks may deduct fees from the amount sent to your recipient.

Typically in the country where the transfer currency is issued, a correspondent bank operates as an agent for the foreign receiving bank (the bank that receives the funds) in the local country to process transactions.

Correspondent lenders often offer a greater variety of mortgages than retail banks or credit unions, and offer speedier closing times. However, they may charge more fees or have more stringent criteria.

Correspondent banking can be defined, in general terms as “an arrangement under which one bank (correspondent) holds deposits owned by other banks (respondents) and provides payment and other services to those respondent banks”.