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http://www.investopedia.com/terms/c/correspondent-bank.asp

Correspondent bank is like a delegator in a country to operate on behalf of the delegatee who doesn't normally has established business in that country.

However, I heard that for some bank groups, one subsidiary can be the correspondent bank for another subsidiary, especially in the area of clearing. Let's say Deutsche Bank Italy can be the correspondent bank for Deutsche Bank North America.

Does it imply that Deutsche Bank Italy can hold a Nostro account in Deutsche Bank North America or vice versa.

I wonder why would these kind of relationship considered as correspondent? What are the limitations/benefits for banks operating in this way?

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Yes it is possible, I worked for a big bank subsidiary in a different country. We had a nostro account with the parent bank, and with its other subsidiaries. I cannot comment on the benefits/limitations of this though.

EDIT: I remember we did not pay fee for the nostro accounts held with the parent and subsidiary banks. Moreover, these accounts were necessary as we had to deal with transactions involving various currencies. If let's say a client wanted to deposit in EUR, the bank should have a EUR nostro otherwise, the bank would not accept euro deposits.

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