Nostro Account vs. Vostro Account

"Nostro" and "Vostro" are Italian terms, evolved from older Latin terms, used to describe the same bank account but from different points of view. Nostro refers to "our" account held in a foreign bank, while Vostro refers to the foreign bank's point of view, whereby they hold "your" account in their bank.

Nostro and Vostro are used when one bank has another bank's money on deposit, typically used in international trading and 澳洲幸运5官方开奖结果体彩网:foreign exchange transactions. Both banks must record the amount on deposit by one bank on behalf of the other. Nostro and Vostro help differentiate between the two sets of accounting records of each bank.

Nostro and Vostro are variations on the Latin words that mean "ours" and "yours," respectively. Modern retail banking is derived from 13th and 14th-century Italy, where depositors and retail banks maintained ledgers of their account balances. The ledger kept by the depositing customer 𝄹called it a Nostro ledger; the bank kept the correspo﷽nding Vostro ledger.

Nostro Account

A Nostro account is the record of a bank that has money 澳洲幸运5官方开奖结果体彩网:on deposit at a foreign bank. For example, Bank A would refer to "our" account at Bank B. Nostro is shorthand for saying "our" money that is on deposit at your bank."

These accounts are often used in settlements of 澳洲幸运5官方开奖结果体彩网:global trade and 澳洲幸运5官方开奖结果体彩网:foreign exchange transactions. Nostro accounts differ from standard 澳洲幸运5官方开奖结果体彩网:demand deposit bank accounts in that they are usually held by financial institutions denominated in foreign currencies.

Vostro Account

Vostro (yours) is the term Bank B uses to describe Bank A's account with Bank B. Vostro refers to "your money on deposit at our bank." A Vostro account is like any other account held by a bank. The account is a record of money owed to or maintained by a third party, typically another bank, but it can be either a company or an individual.

For example, banks in the United Kingdom or the United States of🌌ten hold a Vostro account on behalf of a foreign bank. The Vostro account is🎶 held in the currency of the country where the money is on deposit.

Nostro vs. Vostro Example

Let's say that GTBank, a Nigerian bank, receives a significant amount of money sent to its customers in Nigeria from the United States in the form of remittances. GTBank does not have a physical banking presence in the U.S. As a result, GTBank enters into an agreement, opening an account with Citibank remotely in U.S. dollars. Money sent by U.S. customers and businesses to GTBank account holders in Nigeria will be deposited in GTBank's account with Citibank.

The money deposited is transferred by Citibank via SWIFT to GTBank's U.S. dollar account in Nigeria. SWIFT refers to the Society for Worldwide Interbank Financial Telecommunications, a member-owned cooperative that offers safe and secure financial transactions for its members.

With the transfer complete, GTBank receives the dollar-denominated funds, converts them into the local currency (i.e., the naira), and deposits the money into the local accounts of the recipients.From GTBank's perspective, its U.S. dollar acc♒ount with Citibank is a Nostro account. From Citibank's perspective, it holds a 🤡Vostro account for GTBank in U.S. dollars.

Nostro accounts with debit balances are considered cash assets. Contrarily, Vostro accounts with a credit balance are considered liabilities. Computerized accounting allows for easily reconciling Nostro and Vostro accounts by using "+" or "-" signs in the banks' respective accounting systems.

The Bottom Line

Nostro refers to our account held in a foreign bank, while the same account from the foreign bank's point of view is called a Vostro or your account. Nostro and Vostro accounts are typically used with foreign remittances and 澳洲幸运5官方开奖结果体彩网:foreign exchange transactions, meaning one currency is exchanged for another. The terms Nostro and Vostro help banks differentiate between the accounts from an accounting perspective.

Correction—March 4, 2025: This article has been corrected to state that Nostro and Vostro are Italian words with Latin origins.