What is a correspondent bank?
A correspondent bank is a bank that holds accounts for other banks, usually in its own currency, so those banks can make and receive payments in that currency without being members of its payment systems. Most cross-border payments reach the beneficiary through one or more correspondent banks. Example (invented, for illustration only): a bank in Peru keeps a US dollar account with a bank in New York; when a Peruvian exporter is paid in dollars, the funds arrive in that New York account, and the Peruvian bank then credits the exporter.
- The CPMI at the Bank for International Settlements reported that correspondent banking relationships fell by about 25% between 2011 and 2020, and by 4% in 2020 alone.
- Fewer correspondent relationships mean fewer direct routes between banks, which can lengthen payment chains and add fees.
- CHIPS, the large US dollar system, has 43 direct participants, and other institutions reach it through correspondent relationships with them.
- A supplier's bank details sometimes name its US dollar correspondent and that bank's SWIFT code, which the payer can use as the intermediary.
How correspondent banking works
A bank can only settle payments in a currency where it has access to that currency's payment system. A bank in Lima settles soles through Peru's own systems, but to settle US dollars it needs an account with a bank that has access to the US payment systems. That US bank is its correspondent. The Peruvian bank calls that account its nostro account; the US bank calls it a vostro account.
When a payment passes between two banks that do not share a correspondent, more banks join the chain. Each bank checks the payment, and each may charge for it.
| Payment | A typical route | Where fees can arise |
|---|---|---|
| USD from a large US bank to a large bank abroad | Direct, if the foreign bank holds its dollar account at the US bank | Often none |
| USD from a small US bank or credit union to a bank abroad | Through the US bank's own correspondent, then the foreign bank's New York correspondent | At one or two banks |
| USD between two banks outside the US | Through each bank's US dollar correspondent in the US | At one or more banks |
| EUR, GBP or another currency sent from outside its home region | Through a correspondent in that currency's home country | At one or more banks |
Source: Helm Editorial Team, from the Swift MT103 message structure; actual routes depend on each bank's arrangements. As published on 29 October 2026.
Where a business meets a correspondent bank
A business rarely chooses the correspondent, but it sees the effects. A US dollar invoice paid by a buyer in Europe to a supplier in Asia passes through US correspondents, so it depends on US business days. A payment that arrives a few dollars short has usually lost a correspondent's fee on the way.
Correspondent networks are shrinking. The Committee on Payments and Market Infrastructures (CPMI) at the Bank for International Settlements reported in December 2021 that correspondent banking relationships fell by 4% in 2020 and by about 25% between 2011 and 2020, on data from more than 200 countries and jurisdictions. Fewer relationships leave fewer direct routes, so some payments pass through more banks than before.
Common mistakes with correspondent banks
- Ignoring the correspondent details on a supplier's bank letter. If the supplier's bank names its US dollar correspondent, put it on the payment as the intermediary.
- Assuming a domestic payment needs a correspondent. A payment inside one country on a local rail, such as ACH, SEPA or Faster Payments, passes no correspondent bank.
- Expecting weekend settlement. Correspondent payments in US dollars settle on US business days, wherever the sender and receiver are.
- Treating a deduction as an error. Under shared charges, a correspondent's fee is expected. Agree in the contract who pays it.
Related terms and how Helm handles it
When a correspondent passes a payment along, it acts as an intermediary bank. The accounts behind the relationship are nostro and vostro accounts, and large dollar payments between correspondents settle through CHIPS or Fedwire.
Helm's USD account details in your company's own name receive ACH and Fedwire as domestic US payments, so US customers can pay without a correspondent chain. For payments abroad, Helm uses SWIFT and local rails where available, with the rate, fee and expected arrival shown before sending.
Open a Helm account
USD, EUR and GBP accounts in your company's name, with a named account manager.
Open accountQuestions
What is a correspondent bank?
A bank that holds accounts for other banks, usually in its own currency, so they can make and receive payments in that currency without direct access to its payment systems.
Why do international payments use correspondent banks?
Because most banks cannot settle directly in foreign payment systems. A correspondent with that access settles the payment for them.
Are correspondent banking relationships declining?
Yes. The CPMI reported that they fell by about 25% between 2011 and 2020, and by 4% in 2020, on data from more than 200 countries and jurisdictions.
Do correspondent banks charge fees?
Often. Each bank in the chain may deduct a fee from the payment, depending on the charge code the sender chose.
How can I avoid correspondent banks?
Use a local rail in the beneficiary's currency where possible, or have payers in the United States pay US account details by ACH or Fedwire.
References
- Bank for International Settlements: Correspondent banking trends persisted in 2020, even as payment landscape changed, new data show (13 December 2021)
- The Clearing House: CHIPS
- Swift: MT 103 Single Customer Credit Transfer, Message Reference Guide, Standards MT November 2021 (copy published by BNZ)
- Ohmyfin: Intermediary bank fees: who takes the cut, and how much (25 October 2026)
This guide is general information for businesses, not financial, legal or tax advice. Rules, fees and timings were checked against the sources listed on the review date and may change.