Nostro and vostro accounts

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Nostro and vostro (Italian, from Italian, nostro and vostro; English, 'ours' and 'yours') are accounting terms used to distinguish an account held for another entity from an account another entity holds. The entities in question are almost always, but need not be, banks.


Understanding Terminology[edit]


The terms nostro and vostro remove the potential ambiguity when referring to these two separate accounts of the same balance and set of transactions. Speaking from the bank's point-of-view:

  • A nostro is our account of our money, held by you
  • A vostro is your account of your money, held by us

Note that all "bank accounts" as the term is normally understood, including personal or corporate checking, loan, and savings accounts, are treated as vostros by the bank. They also regard as vostro purely internal funds such as treasury, trading and suspense accounts; although there is no "you" in the sense of an external customer, the money is still "held by us".

Base description[edit]

Thus basically the terms can be described as:

  • A nostro account is one which is held within a foreign country by a domestic bank, in the currency of the foreign country.

These accounts are utilised for facilitating the settlements of Forex and foreign trades.

  • A vostro account is one which is held within a domestic country by a foreign bank, in the currency of the domestic country.

For these accounts the domestic bank is acting like a custodian or managing the accounts of a foreign counterpart. This is also known as a loro account.

A client bank elects to open an account - nostro with another facilitator bank, in the absence of having access to primary clearing arrangements (generally with the Central Bank in the country where the currency is considered a local currency), for settling Treasury or Trade transactions. The facilitator bank, may or may not directly be a participant of the primary clearing system or even be in the country of the origin of currency. From the facilitator bank's perspective, the client bank's account is a vostro.



A bank counts a nostro account with a debit balance as a cash asset in its balance sheet. Conversely, a vostro account with a credit balance (i.e. a deposit) is a liability, and a vostro with a debit balance (a loan) is an asset. Thus in many banks a credit entry on an account ("CR") is regarded as negative movement, and a debit ("DR") is positive - the reverse of usual commercial accounting conventions.

With the advent of computerised accounting, nostros and vostros just need to have opposite signs within any one bank's accounting system; that is, if a nostro in credit has a positive sign, then a vostro in credit must have a negative sign. This allows for a reconciliation by summing all accounts to zero (a trial balance) - the basic premise of double-entry bookkeeping.

Typical usage[edit]

Nostro accounts are mostly commonly used for currency settlement, where a bank or other financial institution needs to hold balances in a currency other than its home accounting unit.

For example: First National Bank of A does some transactions (loans, foreign exchange, etc.) in USD, but banks in A will only handle payments in AUD. So FNB of A opens a USD account at foreign bank Credit Mutuel de B, and instructs all counter-parties to settle transactions in USD at "account no. 123456 in name of FNBA, at CMB, X Branch". FNBA maintains its own records of that account, for reconciliation; this is its nostro account. CMB's record of the same account is the vostro account.

Now, FNBA sells AUD1,000,000 to C (a counterparty who has an AUD account with FNBA, and a USD account with CMB) for a net consideration of USD2,000,000. FNBA will make the following entries in its own accounting system:

(Internal) FX AUD trading account 1,000,000 DR AUD Account in name of C 1,000,000 CR
USD Nostro at CMB (FNBA's nostro) 2,000,000 DR (Internal) FX USD trading account 2,000,000 CR

Over at CMB, they record the following transaction:

USD Account in name of C 2,000,000 DR USD Account in name of FNBA (CMB's vostro) 2,000,000 CR

????? [This is somewhat simplified; in reality C may not have an account with FNBA's corresponding bank, and will make settlement by cheque or some form of electronic funds transfer (EFT). In this case CMB will make entries on several other accounts, such as a Teller's receiving account, or a clearing account with the third bank that the cheque was written on.]

Related expressions[edit]

There is also the notion of a loro account ("theirs"), which is a record of an account held by a second bank on behalf of a third party; that is, my record of their account with you. In practice this is rarely used, the main exception being complex syndicated financing.

In the same style as above:

  • A loro is our account of their money, held by you

See also[edit]

External links[edit]