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What is a 'Nostro Account'

Nostro account refers to an account that a bank holds in a foreign currency in another bank. Nostros, a term derived from the Latin word for "ours," are frequently used to facilitate foreign exchange and trade transactions. The opposite term vostro accounts, derived from the Latin word for "yours," is how a bank refers to the accounts that other banks have on its books in its home currency.

BREAKING DOWN 'Nostro Account'


Locations of Nostro Accounts

Most large commercial banks worldwide hold nostro accounts in every country with a convertible currency. Major examples of convertible currencies are the U.S. dollar, Canadian dollar, British pound, the European euro and the Japanese yen. Prior to the advent of the euro as a currency for financial settlements on January 1, 1999, banks needed to hold nostro accounts in all of the countries that now use the euro. Since that date, one nostro for the entire euro zone has been sufficient. If a country were to leave the euro zone, either voluntarily or involuntarily, banks would need to re-establish nostros in that country in its new currency in order to continue making payments. The most commonly discussed potential exit from the euro zone has been Greece, which received multiple bailout packages since the beginning of the 2008 financial market crisis.

Non-Convertible Currencies



Example of a Payment Using a Nostro


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