Base description Edit
In normal usage:
A nostro account will be in foreign currency (it is a record of money held by a bank in another country in the currency of that country) i.e. a bank in country A keeping a record of money held by a bank in country B, in the currency of country B.
A vostro account will be in the local currency of the bank where the money is being held i.e. it is the bank in Country B's record of the money kept by the bank from country A with it.
For these accounts the domestic bank is acting like a custodian or managing the accounts of a foreign counterpart. These accounts are utilised for facilitating the settlements of Forex and foreign trades.
A client bank elects to open an account with another facilitator bank. The facilitator bank will assist the client bank in making payments in its country's currency, usually using its own access to primary clearing arrangements (generally with the Central Bank in the country where the currency is considered a local currency). In some cases the facilitator bank may not be a primary clearing member but they will have the ability to make payments in local currency, possibly through another bank in the same country.