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.

 

VIDEO

Loading the player...
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 FAQS
  1. What is the difference between a Nostro and a Vostro account?

    Nostro and vostro are simply two different names, or terms, used to describe the same bank account. The terms are used when ... Read Full Answer >>
  2. Where did the term 'Nostro' account come from?

    The term "nostro" is Italian in origin. It means "our" or "ours." In accounting and finance, nostro accounts are often differentiated ... Read Full Answer >>
  3. How does your checking account affect your credit score?

    Your credit report provides a snapshot for prospective lenders, landlords and employers of how you handle credit. For any ... Read Full Answer >>
  4. What is the banking sector?

    The banking sector is the section of the economy devoted to the holding of financial assets for others, investing those financial ... Read Full Answer >>
  5. What's the difference between a letter of credit and a bank guarantee?

    Bank guarantees represent a more significant contractual obligation for banks than letters of credit do. A letter of credit ... Read Full Answer >>
  6. How do leverage ratios help to regulate how much banks lend or invest?

    Banks are among the most leveraged institutions in the United States; the combination of fractional-reserve banking and Federal ... Read Full Answer >>
Related Articles
  1. Economics

    What is a Nostro Account?

    A nostro account is a bank account held in a foreign country by a domestic bank, denominated in the currency of that country.
  2. 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.
  3. Forex Fundamentals

    What Causes A Currency Crisis?

    Find out what can cause a currency to collapse, and what central banks can do to help.
  4. 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.
  5. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  6. 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.
  7. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  8. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  9. Credit & Loans

    What's a Revolving Line of Credit?

    A revolving line of credit is an arrangement made between a company or an individual and a bank to borrow money on a short-term basis.
  10. Savings

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center