Vostro Account

Insurance companies can insure each other, with something called reinsurance? Well, banks (and insurance compaies) do the bank-version of that.

Vostro accounts are a bank’s bank accounts at another bank. The bank that has a vostro account for another bank is called a correspondent bank. This can be necessary when working with tricky and large foreign investments. Vostro accounts are almost always denominated in the local currency. For some banks, it’s just not worth it to open up a branch in a whole new country. Better to sign up for a vostro account.

Correspondent banks will do all the dirty work for the other bank: perform wire transfers, take deposits from customers, etc...all while letting the OG bank take out withdrawals. Like, say, if an American insurance company had a vostro account with funds managed by a Russian bank, on behalf of the American insurance company. Wouldn’t that be a hoot?