Next video:
Loading the player...

When a domestic bank has an account in a foreign bank, and the account is denominated in the currency of that foreign country, it is called a nostro account.  These accounts are used by banks to help facilitate foreign exchange and currency transactions. 

Nostro is derived from a Latin term that means “ours”.  From the domestic bank’s perspective, the account is nostro, as it belongs to the domestic bank.  The opposite of nostro in Latin is “vostro” which means “yours.”  From the perspective of the foreign bank holding the account, it is a vostro account.

For example, a United States bank owns a nostro account in a Mexican bank denominated in Mexican Pesos.  The Mexican bank views the account as a vostro account. 

Since the nostro account is denominated in Mexican Pesos, the U.S. bank uses it to efficiently settle transactions that are denominated in that currency.  Using nostro accounts such as this one also protects the U.S. bank from risk due to exchange rate fluctuations between the U.S dollar and the Mexican peso.

Related Articles
  1. Personal Finance

    What Is The Difference Between A Nostro And A Vostro Account?

    Nostro and vostro are Italian terms that describe the same bank account. They’re used when one bank has another bank’s money on deposit.
  2. Trading

    Peso Surge Suggests Clinton Is in the Drivers Seat

    The Mexican peso rallied on Monday as currency traders anticipated a Clinton election victory.
  3. Investing

    Rebounding Peso Powers Mexico ETF

    The Mexico ETF is soaring in 2017, and the rebounding peso is a big reason why.
  4. Investing

    Why Greece, Oil and China Affect the Mexican Peso

    Discover how oil, Greece and China have all played a part in the rapid devaluation of the Mexican peso compared to other currencies.
  5. Investing

    Should You Open A Foreign Savings Account?

    Would opening a savings account in a foreign bank make sense for you? The pros and cons, how to establish one – and alternatives to consider.
  6. Investing

    Hamburger Economics: The Big Mac Index

    In theory, PPP stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac.
  7. Insights

    How Does a Currency Peg Work?

    When a government initiates a currency peg, it pegs its currency’s value to that of another country.
  8. Investing

    What is a Capital Account?

    Capital account is an economic term that refers to the net change in investment and asset ownership for a nation.
  9. Managing Wealth

    When Offshore Banking Makes Sense for U.S. Expats

    For U.S. expats who have trouble opening bank accounts overseas, offshore banking can be a solution.
  10. Insights

    4 Economic Challenges Mexico Faces in 2016

    Learn how the Mexican economy improved in 2015 and why 2016 looks like a repeat. Find out why the biggest drag on the economy is still government corruption.
Hot Definitions
  1. Covariance

    A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns ...
  2. Liquid Asset

    An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally ...
  3. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  4. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  5. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  6. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
Trading Center