The bank, which is foreign-owned, could also provide treasury services, conduct foreign exchange transactions and accelerate international trade on behalf of the national bank. The corresponding bank charges the national bank for services related to the Vostro account. A Vostro account is a record of money held by a bank or owed by a third party (an individual, a company or a bank) to a bank. For example, the First National Bank of A makes certain transactions (loans, currencies, etc.) in USD, but banks in A will only make AUD payments. For example, ETF opens an EN USD account with the foreign bank Credit Mutuel de B and orders all counterparties to trade in USD at “Account 123456 on behalf of FNBA, CMB, X Branch.” FNBA maintains its own records of this account, for reconciliation; it`s his nostro account. Registering CMB on the same account is the vostro account. Let`s see an example. GTBank, Nigeria, receives a lot of money from the United States in the form of remittances to its home clients. Because GtBank does not have a physical presence in the United States, it enters into an agreement with Citibank, which has a remote open account for GTBank in U.S. dollars. In this way, money received by U.S. customers and businesses that send money to GTBank account holders in Nigeria will be deposited into GTBank`s account with Citibank.
A Vostro account is created to enable a corresponding foreign bank to act as an agent or to provide intermediary services to a national bank. These services include the execution of transfers, withdrawals and deposits for customers in countries where the national bank is not physically present. The terms nostro and vostro are mainly used by banks when a bank holds money in another bank (on a correspondence account often called the Nostro or Vostro account). Both banks must keep records of the amount of money kept by one bank in the name of the other. To distinguish the two data sets from the same balance and a set of transactions, banks designate accounts as nostro and vostro. From the point of view of the bank, whose money is held by another bank: for most banks, the cost of setting up physical branches in each country where its customers need banking services is prohibitive. As a solution, domestic banks can initiate agency relations agreements with correspondence banks to conduct transactions for clients who live abroad or who own companies operating abroad. As a representative of the national bank, the corresponding Bank is authorized to carry out certain financial transactions agreed upon as an agent in the relationship. A Vostro account is required to account for funds held by foreign banks and registered in the accounts of Russian credit institutions, as well as to account for funds received by foreign financial institutions and contracted for the refinancing of prematurely repaid foreign loans. The Vostro accounts of non-resident banks can be opened in both the Russian ruble and the foreign currency. Nostro and Vostro (from Italian, Nostro and Vostro; English, “our” and “your” are accounting terms that are used to distinguish an account for another company from an account that another company holds.
The companies involved are usually banks. With a Vostro account relationship, a national bank customer can go to the office of a corresponding bank to withdraw or deposit money.