You operate your local bank to serve the community, so it’s a priority to meet the needs of all your patrons. When you’re unable to do this completely, correspondent banking can help via collaboration and deposit services. This valuable partnership benefits both the bank and the clientele. Here’s a closer look at these correspondent services and how your institution will benefit.
How Do Correspondent Banking Services Work?
Correspondent banking refers to a financial institution providing services to another bank. Though many of these banks are abroad, there are numerous situations when a domestic one can be valuable. If a patron of a local community bank is traveling away from home, for example, they may need to make a deposit or withdrawal in a location where their small bank doesn’t have any established branches.
In this situation, they can go to the correspondent bank, which has a relationship with their own financial institution and is authorized to provide services on behalf of the community bank. The correspondent team can accept the deposit or provide funds on behalf of the community bank and adjust the patron’s account accordingly. A small fee is charged to provide these services.
The accounts that the correspondent bank serves are called vostro, which means “your account on our books.” The local community bank refers to the account as nostro, or “our account on your books.” The two banks hold books for one another in order to track all credits and debits.
What Are Correspondent Deposit Services?
Deposit services allow your clients to automatically make their federal funds investment on a daily basis. This saves them from needing to analyze their investable position and provides real-time information on their accounts. This improves access to their accounts while maximizing their investable funds, saving them both time and money.
How Do These Services Provide Value for a Community Bank?
Correspondent banking is valuable for local banks who wish to provide complete services to their patrons. It may not be cost-effective to open a new branch across the country or abroad, but your customers will still need services outside their own hometown.
Offering this level of freedom of movement to patrons will bolster your reputation as a modern bank. By building these relationships with other financial institutions, you can meet all your customers’ needs, such as deposits, fund transfers, settlements, check clearing, loans, and currency exchange.
Establishing a corresponding banking partnership with The Independent Community Bankers Bank will help you stay competitive and better serve your customers. After more than 30 years in the industry, ICBB has built a reputation for reliability, cutting-edge technology and convenient services that cut your costs. Learn more about our wide range of services email solutions@icbb.bank.