An intermediary bank is a financial institution that helps route a payment between the sending bank and the Recipient’s bank. It may be needed when the two banks lack a direct account relationship or when a currency requires access through another institution.
Intermediary versus correspondent bank
A correspondent bank is defined by the service relationship it provides to another institution. An intermediary bank is defined by its position between institutions for a payment. The same bank can be both.
| Area | Possible effect |
|---|---|
| Routing | Adds another institution and account relationship |
| Fees | May charge or deduct an intermediary fee |
| Timing | Adds processing and screening steps |
| Tracking | Creates another party in an investigation |
| Returns | May participate in routing returned funds |
Can the sender choose the intermediary?
Sometimes a bank requests intermediary instructions for a particular currency or beneficiary bank. In other cases, the sending bank selects the chain. Supplying an intermediary without confirmation can conflict with the bank’s route.
What should finance retain?
Keep the original instruction, fee option, transaction reference, messages or confirmations supplied by the bank, and the actual Recipient credit. If funds are short, determine whether the difference came from FX, an intermediary deduction or a receiving charge.
Read Swift’s UETR explanation for tracking across intermediary chains. See total transfer cost for the comparison method.
