What Is a Correspondent Bank?

A correspondent bank is an intermediary financial institution that facilitates international wire transfers between banks that do not have a direct banking relationship with each other. When your bank sends money internationally, it may not have a direct account relationship (called a nostro/vostro relationship) with the recipient's bank. In that case, your bank routes the transfer through a correspondent bank that does have that relationship.

Correspondent banks are typically large global banks with extensive international networks: JPMorgan Chase, Citibank, Deutsche Bank, Standard Chartered, Barclays, and HSBC are among the most commonly used correspondents worldwide. They hold accounts on behalf of smaller banks in dozens of countries, acting as hubs in the global payment network.

How Correspondent Bank Routing Works

When you initiate an international wire transfer, the path the money takes depends on the banking relationships involved. Most transfers follow one of three patterns:

What Is an Intermediary Bank?

The terms "correspondent bank" and "intermediary bank" are used interchangeably in most contexts. Technically, a correspondent bank is the institution that holds an account on behalf of another bank (the nostro/vostro relationship), while an intermediary bank refers to any bank that sits in the middle of a payment chain. In practice, every wire transfer form that asks for an "intermediary bank" is asking for the correspondent bank details.

When you fill out a wire transfer form at your bank, you may see a field for "Intermediary Bank" or "Correspondent Bank." This is where you enter the SWIFT code of the middle bank. If you leave it blank, your bank will route through its own correspondent relationships — which is the default for most retail transfers.

How Correspondent Bank Fees Work

Correspondent bank fees are deducted from the principal amount of the transfer, not charged separately upfront. This is the source of most complaints about wire transfers: senders pay all their bank fees, enter the exact amount, and still the recipient receives less than expected.

• Typical range: $10-35 per correspondent bank in the chain
• When deducted: The correspondent deducts its fee before passing the remaining amount onward
• OUR/SHA/BEN instructions: Wire transfers can be sent as OUR (sender pays all fees), SHA (fees shared), or BEN (beneficiary pays all). Even with OUR instructions, some correspondents still deduct from the principal
• Multiple correspondents: Each bank in the chain deducts its own fee separately

How to Avoid Correspondent Bank Fees

Option 1: Use fintech services with local payment networks

Wise, Grey, Chipper Cash, and WorldRemit hold local bank accounts in both sending and receiving countries. When you transfer via Wise, the money never actually crosses international borders through SWIFT. Wise receives your USD domestically via ACH, then sends the equivalent GHS or NGN to the recipient's bank from a Wise local account. No correspondent banks involved, no intermediary fees.

Option 2: Use SWIFT GPI (Global Payments Innovation)

SWIFT GPI is an upgraded SWIFT service that provides tracking, speed guarantees, and more transparent fee disclosure. Banks using SWIFT GPI commit to same-day settlement and provide tracking similar to a package delivery. More importantly, GPI transfers include fee transparency — the recipient bank must credit the full amount unless fees have been explicitly agreed. Ask your bank if they offer SWIFT GPI.

Option 3: Instruct OUR payment type

When initiating a wire, specify OUR (also written as "OURSELF" or "SHA" depending on the bank). OUR means you instruct your bank to cover all correspondent fees. In practice this is imperfect — some correspondents deduct regardless of instruction — but it reduces the likelihood of deductions from the principal.

Case Study: USD Wire from Chase US to Zenith Bank Nigeria

Here is what typically happens when a business in the US sends a USD wire from JPMorgan Chase to Zenith Bank Nigeria:

1. Initiation: Your Chase business account initiates a SWIFT wire. Chase charges $35 outgoing wire fee (deducted from your account separately).
2. Chase routing: Chase routes the transfer directly to Zenith Bank Nigeria's USD nostro account, which Zenith holds at JPMorgan Chase NY. Because Chase IS the correspondent for Zenith, the transfer is direct. No additional correspondent fee.
3. Zenith Bank receipt: Zenith Bank receives the USD in their nostro account and credits the recipient's NGN account after currency conversion at their prevailing exchange rate (typically 1-2% spread from mid-market).
4. Total cost: Chase wire fee ($35) + Zenith FX spread (~1-2%). No correspondent deduction from principal because Chase and Zenith have a direct nostro relationship.

Contrast this with a USD wire from a small US credit union to Zenith Bank Nigeria:

1. Credit union charges outgoing wire fee ($25).
2. Credit union routes through its correspondent bank (e.g. JPMorgan Chase), which deducts $20 intermediary fee from the principal.
3. JPMorgan forwards the remaining amount to Zenith Bank Nigeria (direct nostro relationship).
4. Zenith applies FX conversion spread.
5. Recipient receives principal minus $20 correspondent fee.

Frequently Asked Questions