Correspondent Agreement Between Banks

A corresponding bank is a bank in a country that has the right to provide services to another bank or financial institution in a foreign country. The most frequent services of a corresponding bank are foreign exchange, transaction settlement and business documentation, as well as remittances. Correspondence banks can also act as agents to process local transactions for customers when they travel abroad. At the local level, correspondence banks can accept deposits, process documents and act as transfer agents. Correspondence banks are third-party banks. They act as intermediaries between different financial institutions. As such, they provide cash services between sending and receiving banks, especially in different countries – such as: foreign banks use the services of correspondence banks when it is not financially possible to set up a branch in the country. This allows foreign banks to keep their customers while keeping costs low. The two banks in a correspondence relationship hold accounts for each other for conciliation (followed by debits and credits) between them. Even if a bank has branches or related businesses in several jurisdictions, assets held in a foreign exchange account in a country with a corresponding account are held either with the branch, the subsidiary of that bank abroad, or with another institution. For example, HSBC obtains US dollars from its subsidiary HSBC Bank USA, while DBS Bank Singapore receives US dollars from JPMorgan Chase.

Although each jurisdiction is different and unit values often change for these banks, both serve the same purpose (although limited, as explained above). In all cases, the intermediary and corresponding banks act as a representative unit of a third-party bank that is usually located abroad. Correspondence banks are financial institutions that act as intermediaries on behalf of other financial institutions, usually foreign banks. Correspondence banks can provide treasury services, manage foreign exchange, manage international investments and facilitate international trade and financing on behalf of the foreign bank. The corresponding bank charges the foreign bank for these services. Financial Licensing Advisors maintains relationships with market players around the world, including intermediary and correspondent banks and various financial intermediaries specializing in providing correspondence and intermediate banking services to the international banking sector. The original bank is looking for the SWIFT network in search of a corresponding bank that has agreements with the two banks. The original bank then transfers the transferred funds to the account of the corresponding bank.

After collecting the transfer fee, the corresponding bank sends the money to the receiving bank. The corresponding bank usually calculates 25 to 75 $US for the service. In Australia or within the EU, for example, banks making international transfers are called intermediary banks. However, most jurisdictions do not distinguish between intermediary banks and corresponding banks within the meaning of the legislation. An intermediary or corresponding bank is a bank that has opened an account with your bank (the beneficiary/original bank) and acts, on behalf of that recipient/original bank, as if that bank were providing services to those end-customers. This is an open bank account for and for another bank. These correspondence accounts allow banks to conduct international financial transactions for their customers, which normally require currency exchanges, as is usually the case between an exporting company in one country and an importer in another country.