Cor. an account is an important component of bank settlements

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Correspondent, or the so-called "correspondent account", is a type of calculation on which all types of operations of one bank, performed in accordance with a correspondent agreement, are recorded and subsequently displayed. In other words, this concept implies a bank account opened by a credit institution, which is used to form reserve funds or various transfers made by the aforementioned structure. As a rule, the institutions of the Central Bank of the country and any commercial structures enter into an agreement between themselves, which serves to account for the property they own.

Varieties

Like any other financial term, cor. account is a concept that has several directions. There are three types of calculus: loro, nostro and vostro. Let's take a closer look at each of them. So, the first type serves to determine the account that is opened by the correspondent bank to the institution that isrespondent. In other words, such a cor. Sberbank account reflects all transactions of any other organization. These entries are recorded in the liability of the enterprise. In turn, nostro-cor. account - these are the estimates of the respondent institution that has entered into an agreement with the correspondent bank. For more clarity, let's look at an example. Two banks (A and B) entered into a correspondent agreement. In the event that institution A needs to transfer a certain amount, it can use its nostro account with bank B. Conversely, if there is a need for financial settlements with structure B, then all transactions carried out will be reflected in the correspondent loro account of bank A. Easier speaking, nostro is our account in another bank, and loro is their account in ours. When the first two varieties have become as clear as possible, you can move on to the last type of correspondent accounts - vostro. Its main feature is that it is an agreement concluded between the Central Bank and some foreign institution, the settlements for which are made either in local currency or in banknotes of a third country. This definition is rather complementary, so it is not as common as the first two.

Typology

In addition, one more classification can be distinguished, according to which there are correspondent accounts concluded both between a commercial and the Central Bank of the country, and between two commercial institutions. The first type occurs when a new bank is created, when its authorized capital is formed. Upon successful completion of thisprocess, the Central Bank issues a license to carry out banking activities, and after state registration, the existing cor. the account can be used as a form of accounting for property and a way to carry out settlement transactions. The second type, in turn, implies an agreement between two commercial banks, which establishes a certain procedure for the participation of both structures in financial settlements with clients.

Destination

It should be noted that cor. A bank account is most commonly used for money transfers. The currency may be different, but it will still be assigned to one correspondent account. In addition, as mentioned earlier, banks can operate with the above calculations to account for their property.

Designation

Like many other financial definitions, a correspondent account allows you to encrypt all the necessary information in numerical terms. The Central Bank of Russia accepted that cor. the account is twenty characters, the first three digits of which traditionally indicate the calculation of the first order (301), and the last three numbers contain information about the three-digit conditional number of the settlement participant. For example, c/c 30101810600000000957.