A financial institution with a nostro account checks before paying that the account holds the funds it needs, by estimating the balance. Paying without enough balance creates the risk of an overdraft, where the account goes negative. Staff who are not involved in processing the transactions that affect its balance reconcile the account as early as possible1.

The Bank of Japan's Payment and Settlement Systems Report describes a case in which the receiving bank debits the sending bank's account and credits the payee, and calls that account the nostro account from the sending bank's side2.

Notes

  1. Global Foreign Exchange Committee, "グローバル外為行動規範" (FX Global Code, Japanese provisional translation by the Tokyo Foreign Exchange Market Practices Committee; our translation of the title), December 2024 edition, Principles 53 and 54, pages 50–51 (in Japanese). ↩

  2. Bank of Japan, "決済システムレポート 2024" (Payment and Settlement Systems Report 2024; our translation of the title), September 2024, page 42, note 30 (in Japanese). ↩