A bank (the principal) which has an account with another bank (the agent, or the correspondent bank) that allows it to make payments for its own account and on behalf of its clients. Also, the respondent bank can collect deposits through its correspondent bank, and can avail of banking services that can’t usually be obtained without the intervention of a correspondent bank. Typically, respondent banks have limited access to financial markets or overseas geographic regions, and therefore seek the services of big banks to conduct specific transactions. In most cases, the two banks are located in different cities or countries. Correspondent relationships don’t include transactions between banks as principals (i.e., in the wholesale market).
August 2, 2024
