What is the difference between an intermediary bank and a correspondent bank?
An intermediary bank is the bank who forwards the cash often
because the original bank is a small bank that doesn't handle
foreign payments.
It does not keep the cash, but simply assists in the transfer of
funds.
The correspondent bank comes into play if the end recipient is
located in a country where the currency transferred is not the
native currency. For instance if you transfer USD to Laos. Then
there will be a correspondent bank that covers all transfers to the
Laos bank.
The end bank then has an account at the correspondent bank where
it has all it's foreign currency covered.
Often (but not always) the correspondent bank will be a bank
located in the country where the currency is native. For instance
the USD correspondent banks will often be an American bank.
Related Q&A：
What is the difference between correspondent intermediary settlement bank？Well, let me explain it to you. A correspondent bank is like a partner that helps other banks handle transactions and services in different locations or countries. An intermediary settlement bank, on the other hand, specifically focuses on facilitating the settlement of financial transactions between parties. The main difference is that a correspondent bank has a broader role, providing various services beyond just settlement. Oh, and correspondent banks often have a more extensive network and relationships with multiple institutions. Whereas an intermediary settlement bank is more concentrated on the process of ensuring smooth and accurate settlement of funds. So, that's a key distinction, you know?
