---
title: "What are nostro and vostro accounts? And why they force pre-funding"
seoTitle: "Nostro vs vostro accounts: what they are and how they work"
description: "A nostro account is a bank's account at a foreign bank, in that bank's currency. A vostro is the same account seen from the other side. Why both trap cash."
date: "2026-10-01"
updated: "2026-10-01"
category: "payments"
author: "BlindPay Team"
faq:
  - q: "What is the difference between a nostro and a vostro account?"
    a: "They are the same account seen from two sides. If a US bank holds Brazilian reais in an account at a Brazilian bank, the US bank calls it its nostro account (\"ours, with you\"). The Brazilian bank calls it a vostro account (\"yours, with us\"). The money and the ledger are the same. Only the point of view changes."
  - q: "What is a loro account?"
    a: "A loro account (\"theirs\") is the term a bank uses for an account that a third bank holds at another bank. If Bank A talks about Bank C's account at Bank B, that is a loro account from Bank A's view. The CPMI's correspondent banking report also uses \"loro\" for the respondent bank's account in the correspondent's books."
  - q: "Why do nostro accounts require pre-funding?"
    a: "Because a correspondent bank pays out of the balance in the account. To send reais to a supplier in Brazil, the sending bank needs reais already sitting in its nostro in Brazil, or a credit line from the correspondent. The balance has to cover every payment until the next refill lands, which can take days on an international wire."
  - q: "Do businesses have nostro accounts?"
    a: "Usually not by that name. Nostro and vostro are interbank terms. A business that holds a euro account at a German bank to pay European suppliers is doing the same thing, though: keeping a foreign currency balance in advance so payments can go out locally. It carries the same idle cash and currency exposure."
  - q: "How is a nostro account reconciled?"
    a: "The bank keeps a mirror account in its own books that tracks what it thinks is in the nostro. The correspondent sends statements, traditionally SWIFT MT950 messages or ISO 20022 camt.053 files, and the bank matches every entry against its mirror. Unmatched items, such as unexpected fees or delayed credits, go to an investigations team."
  - q: "Can you send cross-border payments without a nostro account?"
    a: "Yes. Most companies already do, through their bank's correspondents, which still pre-fund nostro accounts behind the scenes. The alternative that removes the foreign balance entirely is to settle in a stablecoin and pay out over the recipient's local rail, funded at the moment you send, so no money waits in the destination country."
---

A nostro account is a bank's account at a foreign bank, held in that bank's local currency, used to make and receive payments there. A vostro account is the same account seen from the foreign bank's side. Cross-border payments run through these accounts, and each one needs a balance before the first payment goes out. BlindPay replaces that balance with stablecoin settlement funded at send time.

**Key takeaways**

- Nostro means "ours, with you." Vostro means "yours, with us." Loro means "theirs." All three describe accounts banks hold with each other.
- A correspondent payment is a chain of debits and credits on these accounts, carried by SWIFT messages.
- The balance in a nostro has to cover outgoing payments until the next refill arrives, so it is pre-funded and mostly idle.
- The CPMI counted 22% fewer active correspondent banks in 2019 than in 2011, which makes payment chains longer and nostro relationships harder to get.
- Settling in stablecoins and paying out over local rails removes the need for a balance in each destination currency.

## What is a nostro account?

A nostro account is an account one bank holds at another bank in a foreign country, denominated in that country's currency. The word is Italian for "ours": from the account holder's view, it is "our money, held with you."

Example: a US bank opens an account in reais at a bank in São Paulo. The US bank can now pay reais to anyone in Brazil by instructing the São Paulo bank to debit that account. In the US bank's books, that is its BRL nostro.

The Committee on Payments and Market Infrastructures (CPMI) describes the arrangement in its [correspondent banking report](https://www.bis.org/publications/correspondent-banking-final-report.pdf): one bank, the correspondent, "holds deposits owned by other banks (respondents) and provides payment and other services" to them. Reciprocal relationships, the report notes, "may involve the use of so-called nostro and vostro accounts to settle foreign exchange transactions."

## What is a vostro account, and what is a loro account?

A vostro account is the same account, described by the bank that holds it. "Vostro" is Italian for "yours." The São Paulo bank in the example calls the US bank's reais balance a vostro account: "your money, held with us."

A loro account ("theirs") is how a bank refers to an account that a third bank holds somewhere else. If a German bank mentions the US bank's account in São Paulo, it is speaking about a loro account. Usage varies, though. The [ECB's glossary](https://www.ecb.europa.eu/services/glossary/html/glossn.en.html) and the CPMI report both use "loro" for the other side of a nostro, the account as the holding bank sees it, which is the same thing as a vostro.

| | Nostro | Vostro | Loro |
| --- | --- | --- | --- |
| Meaning | "Ours, with you" | "Yours, with us" | "Theirs, with them" |
| Whose view | The bank that owns the money | The bank that holds the money | A third bank talking about the other two |
| Currency | The foreign bank's local currency | The holding bank's own currency | Either |
| Where the real ledger lives | At the foreign bank | In the holding bank's own books | At the holding bank |
| What the owner keeps at home | A mirror account to track the balance | Nothing extra: it is a liability on its books | Nothing |

One account, three names. Which one you use depends on who is talking.

## How does a cross-border payment move through nostro and vostro accounts?

A cross-border payment is a series of debits and credits on accounts that banks hold with each other, with a SWIFT message telling each bank what to do. The CPMI report illustrates the basic case, where bank A pays a customer of bank C through bank B because A and C have no account with each other.

Here's the flow for a US company paying a supplier in Brazil in reais:

1. **The company's account is debited.** The US bank takes dollars from the company's account and converts them to reais at its own rate.
2. **A payment message goes out.** The US bank sends an MT103 or its ISO 20022 equivalent, pacs.008, to its correspondent in Brazil.
3. **The nostro is debited.** The Brazilian correspondent debits the US bank's reais account. That is the US bank's nostro and the correspondent's vostro.
4. **The beneficiary bank is credited.** If the supplier banks elsewhere, the correspondent pays the supplier's bank through Brazil's local payment system.
5. **The supplier is credited.** The supplier's bank credits the supplier's account in reais.
6. **Both sides reconcile.** The US bank updates the mirror account in its own books and later matches it against the correspondent's statement.

When there's no direct relationship, more banks join the chain, each with its own nostro and vostro accounts and its own fee. The CPMI report describes two ways to route this: the serial method, where the MT103 passes through every bank in the chain, and the cover method, where the MT103 goes straight to the beneficiary's bank and the funds follow separately through the correspondents. Each hop can deduct a fee, which is where the OUR, SHA, and BEN charge codes come from. [Hidden fees in international wires](/resources/more/hidden-fees-international-wires-our-sha-ben) explains how to read them.

## Why do nostro accounts force pre-funding?

Because the correspondent pays out of the balance in the account. To pay reais in Brazil, there must already be reais in the nostro, or a credit line from the correspondent covering the overdraft.

Three things set how big that balance has to be:

- **Outflows between refills.** The balance must cover every payment until new money arrives.
- **Refill lead time.** Topping up a nostro usually means an FX trade and an international transfer, which takes one or more business days and stops at weekends and holidays.
- **A safety margin.** Payment volumes spike, refills get delayed, and nobody wants a payroll run to bounce because a nostro hit zero.

The result is a balance that sits in a foreign currency, earns little, and moves with the exchange rate. Multiply it by every currency a bank pays in. [Correspondent banking vs stablecoin liquidity](/resources/more/correspondent-banking-vs-stablecoin-liquidity) puts numbers on that across five markets.

## How big does a nostro balance need to be?

A simple rule of thumb: required balance equals average daily outflow times the number of days it takes to refill, plus a margin for spikes. This illustrative example uses round numbers for a single corridor.

A payroll platform pays Mexican contractors. Assumptions:

- Average outflow: the peso equivalent of $150,000 per business day.
- Refill lead time: 3 business days from deciding to top up to funds landing in the nostro.
- Safety margin: 2 more business days of outflow.

| Line | Calculation | Balance (USD equivalent) |
| --- | --- | --- |
| Cover outflows during the refill | $150,000 × 3 days | $450,000 |
| Safety margin | $150,000 × 2 days | $300,000 |
| **Minimum nostro balance** | | **$750,000** |
| Cost at an assumed 4% a year | $750,000 × 4% | About $30,000 a year |
| Loss on an assumed 5% peso move | $750,000 × 5% | About $37,500, once |

Two features of this math matter more than the totals. The balance scales with volume: double the payroll, double the nostro. And the refill lead time drives everything: cut it from three days to zero, and the main term goes away.

## How is a nostro account reconciled?

By matching two ledgers that should agree and often don't. The account owner keeps a mirror account, which the CPMI describes as a record "kept for accounting purposes," and compares it against statements from the correspondent.

Those statements traditionally arrive as SWIFT MT950 messages, and increasingly as ISO 20022 camt.053 files. Every entry gets matched to an expected payment or refill. The leftovers are the problem: fees deducted by an intermediary, credits that arrived a day late, or payments that bounced. Each one becomes an investigation, and each investigation is a person's time.

The more nostro accounts a business runs, the more of this it does.

## Why are correspondent relationships getting harder to keep?

Because banks have been cutting them. The CPMI's quantitative review found the number of active correspondent banks worldwide fell [22% between 2011 and 2019](https://www.bis.org/cpmi/paysysinfo/corr_bank_data/corr_bank_data_commentary_2008.htm), and the number of active corridors fell roughly 12% over the same period.

The 2016 CPMI report links the retreat to the cost of AML and counter-terrorist-financing compliance and a higher perception of risk. For smaller banks and fintechs in emerging markets, that means fewer correspondents willing to hold their nostro accounts, longer chains for the ones that remain, and more fees along the way. [Why cross-border payments are slow](/resources/more/why-are-cross-border-payments-slow) shows what each extra hop does to timing.

## How can you pay across borders without your own nostro balances?

Four ways, and only one removes the foreign balance from the system rather than moving it to someone else.

| Approach | Who holds the foreign balance | What you pre-fund | Typical speed to the recipient |
| --- | --- | --- | --- |
| BlindPay: stablecoin settlement plus local rails, funded at send time | Nobody holds a balance for you; local currency comes from a liquidity provider at payout | Nothing beyond the payout in flight | Minutes on Pix, SPEI, and Transfers 3.0; 1 to 2 business days on ACH, SEPA, and ACH Colombia |
| Your bank's correspondent network | Your bank, in its nostro accounts | Nothing directly, but you pay for it in fees and FX spread | Typically 1 to 5 business days |
| Your own foreign bank accounts | You | A balance in every currency you pay in | Same day, once the balance is there |
| Provider with a pre-funded balance | You, at the provider | A top-up before each payout cycle | Depends on the provider |

The last row is the trap to watch for. A provider can remove your foreign bank accounts and still ask you to keep a balance with it. [What "no pre-funding" means in a stablecoin API](/resources/more/no-pre-funding-stablecoin-payouts) sorts the funding models, and [what a liquidity market is](/resources/more/what-is-a-liquidity-market-cross-border-payments) explains why pooled local currency is cheaper than a balance per company.

## How does BlindPay replace nostro balances?

BlindPay settles the cross-border leg in a stablecoin such as USDC or USDT and pays the recipient over the local rail, so no balance has to sit in the destination currency ahead of time. [What is real-time cross-border settlement](/resources/more/what-is-real-time-cross-border-settlement) covers the full model. You fund each payout when you create it.

The flow, from the [payouts docs](/docs/payouts):

1. **Quote.** You request a payout quote. The rate and fees lock for five minutes.
2. **Fund.** You approve exactly the quoted stablecoin amount from your wallet. BlindPay pulls only that amount, only at that moment.
3. **Settle.** The stablecoins move on-chain in seconds to minutes.
4. **Pay out.** The local currency goes out over Pix, SPEI, ACH, RTP, SEPA, Transfers 3.0, ACH Colombia, or SWIFT (POBO/COBO), with UETR tracking and MT103 confirmations on SWIFT payments.

Where do the dollars come from? Either a stablecoin wallet you already hold, or a [US virtual account](/resources/more/stablecoin-virtual-accounts-explained) that turns incoming ACH, wire, or SWIFT deposits into USDC or USDT. Either way, the balance you keep is in one currency, in one place. Funding from your own wallet stays non-custodial; managed wallets, a beta product, are BlindPay-custodied.

For collections, [POBO vs COBO](/resources/more/swift-pobo-vs-cobo-explained) covers how a platform receives international wires in its customer's name without opening a foreign account for each one.

## What to do next

Size the nostro balance for your largest corridor with the formula above, then compare it to funding at send time. Run a test payout on a free development instance with the [payout quickstart](/docs/quickstart-payout) to see the quote, fund, and settle steps end to end.