Nostro Account

AAA

DEFINITION of 'Nostro Account'

A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts are used to facilitate settlement of foreign exchange and trade transactions. The term is derived from the Latin word for "ours." Conversely, accounts that are held by the domestic bank in its home country for foreign banks are called vostro accounts, derived from the Latin word for "yours."

INVESTOPEDIA EXPLAINS 'Nostro Account'

For example, a U.S. bank may have nostro accounts with one or more Canadian banks. These accounts will be denominated in Canadian dollars, which enables efficient settlement of transactions that are Canadian dollar denominated. Nostro accounts also minimize the exposure of the U.S. bank to undue exchange rate risk.




RELATED TERMS
  1. Cross-Currency Settlement Risk

    A type of settlement risk in which a party involved in a foreign ...
  2. Correspondent Bank

    A financial institution that provides services on behalf of another, ...
  3. Due To Account

    A liability account typically found inside the general ledger ...
  4. Interbank Deposits

    Any deposit that is held by one bank for another bank. In most ...
  5. Vostro Account

    The account that a correspondent bank, usually located in the ...
  6. Settlement Risk

    The risk that one party will fail to deliver the terms of a contract ...
Related Articles
  1. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  2. What Causes A Currency Crisis?
    Forex Fundamentals

    What Causes A Currency Crisis?

  3. Top 8 Most Tradable Currencies
    Forex Education

    Top 8 Most Tradable Currencies

  4. Forex: Wading Into The Currency Market
    Forex Education

    Forex: Wading Into The Currency Market

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center