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What is the difference between a Nostro account and a Vostro account?

A nostro account and a vostro account are two different types of bank accounts that are used in international trade and finance. Nostro and vostro are terms that are used to indicate which bank is holding the account, with nostro meaning “our” in Latin and vostro meaning “your” in Latin.

A nostro account is a bank account that is held by one bank in another bank’s currency. For example, if a bank in the United States has a nostro account with a bank in the United Kingdom, the account will be denominated in British pounds. The bank in the United States can use this account to hold funds in the local currency, which can then be used for transactions with the bank in the United Kingdom or other banks in the local market.

A vostro account is the opposite of a nostro account. It is a bank account that is held by one bank in another bank’s currency, but is designated as belonging to the other bank. For example, if a bank in the United Kingdom has a vostro account with a bank in the United States, the account will be denominated in US dollars and will be designated as belonging to the bank in the United Kingdom. The bank in the United States can use this account to hold funds in the local currency on behalf of the bank in the United Kingdom.

Nostro and vostro accounts are used extensively in international trade and finance, as they allow banks to hold and transfer funds in the local currency of the country in which they are operating. This can help to reduce the risks and costs associated with foreign exchange transactions, and can make it easier for banks to conduct business in foreign markets.

This page was last updated on January 2, 2023.