A correspondent bank provides payment or other banking services to another financial institution, often where the sending and receiving banks lack a direct relationship or local access. The arrangement allows one bank to use accounts and services maintained by another.
Why correspondent banks are used
A bank cannot maintain direct accounts and payment-system access in every country and currency. Correspondent relationships extend that reach. A payment may pass through one or more institutions before the beneficiary bank receives funds.
| Party | Role |
|---|---|
| Ordering institution | Receives the payer’s instruction |
| Correspondent bank | Provides account, currency or routing access |
| Intermediary bank | Carries the payment between institutions |
| Beneficiary bank | Credits the Recipient’s eligible account |
How can a correspondent affect the payment?
- It may require additional routing data.
- It can add processing time or screening.
- It may deduct or charge a fee.
- It can reject an unsupported currency, purpose or account route.
The terms correspondent and intermediary overlap in everyday use. Correspondent describes an institutional service relationship; intermediary describes the bank’s position in a particular payment chain.
Source: Swift correspondent banking
Quotable Payments may offer a different approved route for an eligible payment. Compare route-level cost and evidence rather than assuming fewer visible bank names always means fewer risks.
