What Is the Correspondent Bank Chain?

When you send euros abroad, the money often does not jump directly from the sending bank to the recipient bank. If the two banks do not hold an account with each other, another bank that has an account relationship with both becomes the intermediary. This intermediary is called a correspondent bank. How many correspondent banks there are between the sender and the recipient directly affects the time of the transfer, the total cost and the amount reaching the recipient.

How does the chain work? (nostro / vostro)

In an international transfer, the money does not physically "travel"; the account balances between banks are updated. An account a bank opens in its own name at another bank is called a nostro account ("our account"), and an account a bank holds within itself in the name of another bank is called a vostro account ("your account"). If two banks have established such an account relationship with each other, the transfer can be settled in one step through these accounts.

If there is no direct relationship, the sending bank brings in an intermediary bank that has an account relationship with both. Sometimes a single correspondent is enough; sometimes one correspondent is needed on the sending side and another on the recipient side, and the chain extends to two or more links. At each link, the message is transmitted over the SWIFT network, the accounts are updated, and it is handed to the next bank.

Where and why does the deduction arise?

An intermediary bank in the chain can apply its own service fee while passing the transaction through. Who bears this fee depends on the charge-sharing code chosen in the SWIFT transfer:

• OUR: The sender bears all charges; the aim is for the full amount to reach the recipient (still, there can be small deviations in practice).
• SHA (shared): The sender pays its own bank's fee; the intermediary bank charges along the way are usually deducted from the amount. Under this option, the recipient may receive less than the instructed amount.
• BEN: All charges are loaded onto the recipient; the deductions are taken from the sent amount.

An important caveat: OUR / SHA / BEN are concepts specific only to SWIFT transfers. These charge codes do not apply to SEPA SCT transactions. Also, as the chain lengthens, it becomes harder to calculate the net amount reaching the recipient in advance; each intermediary bank's practice can vary by transaction, so the result is always an estimate.

Direct relationship or indirect chain?

As the number of correspondents between the sending and receiving bank increases, the transaction becomes both slower and worse in cost and transparency. The table below compares the two situations (the values are typical trends; each transaction can be different):

As the sender, you usually cannot choose how many correspondent banks will come into play; this depends on the account relationships banks have established with one another and the routing they choose. Different banks can use different chains on the same corridor, so the cost and time can vary from bank to bank.

Contrast with SEPA

The correspondent bank chain is a feature of the classic international transfer (SWIFT). By contrast, in a genuine SEPA SCT transaction there is typically no correspondent bank chain: euro transactions run over the common clearing and settlement infrastructure, so items such as intermediary bank charges along the way typically do not come into play. This is one of SEPA's core advantages within the eurozone.

But this advantage applies only when the transaction is genuinely SEPA — that is, in euros and with the recipient bank reachable in the relevant SEPA scheme. Turkey is not within SEPA scope today; euro transfers between Turkey and Europe go via SWIFT, and for this reason you may encounter a correspondent bank chain. For Turkey's current status, see the Turkey SEPA status page. If you wonder why a transaction goes as SWIFT rather than SEPA, the why did my bank send it as SWIFT? guide helps.

What can you do?

1. Ask about the charge option. Ask your sending bank about the OUR / SHA / BEN options and which is suitable for the full amount to reach the recipient.
2. Ask for the estimated total cost. The bank may know only its own fee; the intermediary bank deductions along the way cannot be known exactly in advance, but try to learn a range.
3. Calculate the estimated net amount. See the possible deduction with the How much reaches the recipient tool.
4. Consider alternative corridors. Sending to the same country with a different bank or method can mean a different correspondent chain and cost.

Summary

The correspondent bank chain is one or more intermediary banks that an international transfer brings in when the sending and receiving bank have no direct account relationship. Each link can apply a fee or deduction; as the chain lengthens, the time lengthens, the cost rises and it becomes harder to see the net amount reaching the recipient in advance — especially under the SHA charge option. Because Turkey is outside SEPA, Turkey–Europe euro transfers can encounter this chain; in a genuine SEPA SCT there is typically no such chain. The exact deduction amount varies by transaction; the results are always estimates and must be confirmed with your bank before issuing a payment instruction.