nostros

Nostro accounts are bank accounts that a domestic bank maintains in a foreign bank, typically denominated in the foreign currency, to facilitate cross-border payments and settlement. The term derives from the Italian word for "ours" and is part of a traditional set of terms used in correspondent banking to describe internal accounting relationships between banks. In practice, nostros enable a bank to execute international transactions without repeatedly converting currencies or transferring funds through external channels each time a payment is made.

A nostо account is used to settle payments, make payments to foreign suppliers, and process foreign currency transactions more efficiently. When a domestic bank sends a payment in a foreign currency, it often settles the transfer by debiting its nostо account with the foreign partner bank and crediting the recipient’s account in the foreign bank’s books. The foreign bank maintains a corresponding nostro balance to reflect the funds it holds for the domestic bank. Banks typically maintain multiple nostros across different correspondent banks to cover various currencies and regions.

Management of nostros involves regular reconciliation, cash management, and monitoring of liquidity and credit risk. Banks rely on settlement rails such as SWIFT and other payment networks, along with periodic statements, to verify balances and detect discrepancies. Regulators may require risk controls and reporting related to foreign-currency exposures and cross-border settlements.

In modern finance, nostro accounts remain a core element of international banking infrastructure, though they are increasingly complemented by real-time payment systems, digital currencies, and more integrated cross-border settlement arrangements.