Nostro and vostro accounts

Nostro and vostro (Middle Italian, from Latin, noster and voster; English, ours and yours) are accounting terms used to distinguish an account you hold for another entity from an account another entity holds for you. The entities in question are almost always, but need not be, banks.
Contents
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* 1 Origins
* 2 Related expressions
* 3 See also
* 4 External links

Origins

It helps to recall that the term account refers to a record of transactions, whether current, past or future, and whether in money, or shares, or other countable commodities. Originally a bank account just meant the record kept by a banker of the money they were holding on behalf of a customer, and how that changed as the customer made deposits and withdrawals (the money itself probably being in the form of specie, such as gold and silver coin).

Some customers will keep their own records of their transactions, for instance, so they can check for errors by the bank. That record kept by the customer is also an account, of the money the bank is holding for them. When that customer is another bank, since they also keep other accounts (of the money they are holding for their customers) there is a need to clearly differentiate between these two types of accounts.

The terms nostro and vostro remove the potential ambiguity when referring to these two separate accounts of the same balance and set of transactions. Speaking from the bank's point-of-view:

* A nostro is our account of our money, held by you
* A vostro is our account of your money, held by us

Note that all "bank accounts" as the term is normally understood, including personal or corporate chequing, loan, and savings accounts, are treated as vostros by the bank. They also regard as vostro purely internal funds such as treasury, trading and suspense accounts; although there is no "you" in the sense of an external customer, the money is still "held by us".

Interestingly, a bank customer who keeps a parallel record of their chequing account or credit card at home in order to, say, verify their statements, is in theory keeping a nostro account.

Related expressions

There is also the notion of a loro account ("theirs"), which is a record of an account held by a second bank on behalf of a third party; that is, my record of their account with you. In practice this is rarely used, the main exception being complex syndicated financing.

In the same style as above:

* A loro is our account of their money, held by you.