what is a vostro account 
a vostro account is an account a correspondent bank holds on behalf of another bank these accounts are an essential aspect of correspondent banking in which the bank holding the funds acts as custodian for or manages the account of a foreign counterpart for example if a spanish life insurance company approaches a u s bank to manage funds on the spanish life insurer s behalf the account is deemed by the holding bank as a vostro account of the insurance company understanding vostro accountsa vostro account is established to enable a foreign correspondent bank to act as an agent or provide services as an intermediary for a domestic bank these services include executing wire transfers withdrawals and deposits for customers in countries where the domestic bank does not have a physical presence the foreign correspondent bank might also perform treasury services execute foreign exchange transactions and expedite international trade on behalf of the domestic bank the correspondent bank charges the domestic bank for the services associated with the vostro account vostro account vs nostro accountthe term vostro translated from latin means your as in your account from the foreign correspondent bank s point of view the funds held on behalf of other banks are referred to as vostro accounts and are denominated in the local currency from the perspective of domestic banks the funds deposited at correspondent banks are referred to as nostro accounts nostro translated from latin means our as in our accounts nostro accounts are denominated in the foreign currency of the correspondent bank in the context of banking and finance a vostro account is the account held by the respondent bank on behalf of the correspondent bank meanwhile a nostro account is the account held by the correspondent bank at the respondent bank these two terms reflect the perspective of each bank in the correspondent banking relationship small domestic banks that lack financial and human resources sometimes use the services of larger correspondent banks in foreign countries as an economic way to serve clients with global banking needs uses of vostro accountsthere are several situations where vostro accounts are typically used the most common situations include but are not limited to vostro accounts in an agency relationshipfor most banks the cost of building physical branches in every country their customers might need banking services is prohibitive as a solution domestic banks can initiate agency relationship agreements with correspondent banks to transact business for customers who are traveling living abroad or who own companies that do business abroad as an agent of the domestic bank the correspondent bank is authorized to perform certain agreed upon financial transactions acting as a fiduciary in the relationship in this relationship both banks perform due diligence on each other to assess their credibility financial stability compliance with regulations and suitability for the intended agency relationship the banks also negotiate terms of the agency relationship agreement document it in a formal agreement ensure compliance with relevant regulatory requirements and implement the necessary operational and technical processes to facilitate transactions and reporting related to the vostro account vostro accounts in an intermediary relationship