What are correspondent bank relations

Banks or financial institutions that wish to receive and make payments in foreign currencies for clients across the globe must establish correspondent banking relations. The bank is effectively acting as the correspondent’s agent or conduit, processing and accepting payments on behalf of their clients.

The scope of correspondent banking relations

Individuals and companies that wish to cater to clients who are transacting payments and transferring funds internationally are required to establish correspondent relations with other banks and financial institutions. Correspondent bank relations enable one banking institution to provide banking services to another financial institution.

By entering an agreement that enables the financial institution to correspond effectively with another, banks are able to provide their customers with a wide scope of international banking services. To establish the agreement for correspondent bank relations, banks and financial institutions are required to pay an annual fee. This fee is not for the correspondent bank that you are entering the agreement with but is a payment for providing an additional service to your customers.

In a similar manner to SWIFT membership, correspondent bank relations are required if the bank is specializing in payment processing, wire transfer services and trade finance. When seeking to provide correspondent bank relations to your customers, it is imperative that you find the most suitable offshore bank to form the agreement with in terms of services offered and costs implemented. It is strongly advised to enlist the services of a professional consultancy to streamline the entire procedure and ensure that you complete it in a professional and timely manner.