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. Settlement Risk

    The risk that one party will fail to deliver the terms of a contract ...
  6. Vostro Account

    The account that a correspondent bank, usually located in the ...
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Forex Fundamentals

    What Causes A Currency Crisis?

    Find out what can cause a currency to collapse, and what central banks can do to help.
  3. Forex Education

    Top 8 Most Tradable Currencies

    Currencies can provide diversification for a portfolio that's in a rut. Find out which ones you need to know.
  4. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  5. Forex Education

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  6. Entrepreneurship

    JPMorgan vs. Goldman Sachs: A Tale of Two Stocks

    The performance of JPMorgan and Goldman has been impressive, but one has a slight edge.
  7. Stock Analysis

    How Citigroup Ensured That It's Too Big to Fail

    As a business, Citi has everything going for it. Scale, operational breadth...and the ear of key policymakers.
  8. Economics

    Mitigation Trade: Making Up For Environmental Harm

    Mitigation banking is a system by means of which the liability of ecological damage is transferred from the permittee to the mitigation banker through a system of credits and debits under regulatory ...
  9. Personal Finance

    What's a Bank Draft?

    A bank draft is a type of check. The bank guarantees payment, making it a more attractive option for the check recipient.
  10. Personal Finance

    Overdrafting

    An overdraft occurs when money is withdrawn from a bank account in an amount that exceeds the funds available in the account. Banks often permit this as a form of short-term loan to the account ...

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center