Intermediary banks and correspondent banks are both third-party banks. They are used for beneficiary banks in order to help facilitate funds transfers as well as transaction settlements. The Beneficiary bank can be described as the bank with which a person or company holds an account.
In both instances an individual or organization is likely to have an account at the bank that issued the account. This bank would then utilize the intermediary or correspondent bank to finish the procedure of moving funds from the bank that issued it to the beneficiary bank.
The distinctions between correspondent banks and intermediary banks aren’t uniform. Depending on where in the world the account holder is from, correspondent banks are either distinct from intermediary banks, or they can be a type of intermediary bank–indistinguishable from intermediary banks.
Correspondent Banks
A correspondent bank offers services on behalf of a different bank, acting as of a mediator between the banks that issue the money and bank that is receiving. Banks in the United States often employ the banks of correspondents as their agents abroad to conclude transactions which begin or close in foreign countries.
The correspondent bank has the ability to complete various transactions for the national bank. This includes completing wire transfers and accepting deposits, acting as agents for transfers, as well as coordinating documents for a different bank.
Intermediary Banks
This play a similar function to correspondent banks. A bank that acts as an intermediary is intermediary between the issuing bank and the receiving bank, which can be found in various countries.
A bank intermediary is typically required when international wire transfers are being made in between banks usually in countries that don’t have a formal financial relationship.
Key Differentialities
Within the U.S. and some other countries, there can be a distinction between the different functions that correspondent and intermediary banks play.
A differentiator one distinction is that the correspondent bank are typically accountable for transactions which involve multiple currencies. For instance, if the person making the transfer is within the U.S. and is sending money to a person in Denmark the correspondent bank will be accountable for all transactions that involve to the U.S. dollar to the Danish Krone. A correspondent bank located in Denmark which handles foreign currency could collect the money on behalf of the recipient.
The correspondent banks are usually situated in countries where both currencies are local, however often, banks are located in a different nation.
Intermediary banks transfer cash to facilitate foreign transactions However, the transactions only involve one currency. In this scenario the domestic bank isn’t big enough to manage international transfers, and so is able to connect with the intermediary banks.
Special Beacons
Wire transfers, an electronic method of transfer of cash to another person or entity is a common transactions at all banks however, international wire transfers cost more and more difficult to perform.
In certain regions of the globe, such as Australia as well as EU member countries banks that handle international transfer transactions are referred to as intermediary banks. There is no distinction between correspondent and intermediary banks.
The majority of wire transfers in the world are handled via the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. If there isn’t a working connection between the issuing and bank that receives the wire transfer, the receiving bank is able to check the SWIFT network to find an intermediary or correspondent bank with arrangements to both banks.
Intermediary banks
Intermediary banks play a similar function in the same way as correspondent banks. An intermediary bank also serves as a middleman between the banks that issue money and the bank that is receiving and sometimes, in various countries.
A third party bank is usually required when international wire transfers are being made among two financial institutions, typically in countries that don’t have a financial connection.
Key Variations
Within the U.S. and some other countries, there’s sometimes an articulation of the distinct role that intermediaries and correspondent banks play.
The differentiator in this case is the fact that correspondent banks are typically accountable for transactions which involve multiple currency types. For instance, if the person who initiated the transfer is within the U.S. and is sending money to someone from Denmark the correspondent bank will be accountable for all transactions between that U.S. dollar to the Danish Krone. A correspondent bank located in Denmark that deals with foreign currencies could collect the money on behalf of the recipient.
The correspondent banks are usually located in countries in which the two currencies are native, however often, banks are located in another country.
Intermediary banks transfer cash to facilitate foreign transactions however, the transactions only involve one currency. In this scenario the domestic bank is not big enough to manage international transactions, so it relies on an intermediary institution.
Extra Considerations
Wire transfer–an electronically-mediated method of sending money to another person or an entity extremely frequent transactions at all banks however, international wire transfers can be more expensive and more difficult to perform.
In certain regions of the globe, such as Australia as well as EU member countries banks that specialize in international transfers are known as intermediary banks. There is no distinction between correspondent and intermediary banks.
The majority of international wire transfers are processed through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. If there is no connection between the issuing and bank receiving the transfer, the issuing bank is able to look through the SWIFT network to find an intermediary or correspondent bank that has agreements to both banks.
