Google’s Answer
The term correspondent bank refers to a financial institution that provides services to another one—usually in another country. It acts as an intermediary or agent, facilitating wire transfers, conducting business transactions, accepting deposits, and gathering documents on behalf of another bank.
Our Answer
A correspondent bank offers another bank or payments firm access to payment settlement faculties to enable clearing of messages sent cross border via SWIFT. Barclays for example would use JPMorgan as its correspondent bank for clearing US Dollars. Correspondent banks are required as ultimate settlement of transactions are performed by central banks, who only give access to ultimate clearing to domestically located banks.
