In this article, we’re looking at intermediary bank meaning, the role they play in international banking, and why you should always know which intermediary bank your bank uses.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Intermediary Bank Meaning 101
- Intermediary Bank vs Beneficiary Bank
- Why Should I Use Intermediary Banks?
- Frequently Asked Questions
- Ready to Explore Your Options?
Intermediary Bank Meaning
Intermediary bank means a bank that sends and receives funds on behalf of other financial institutions and their clients. As a result, intermediary banks are commonly used to facilitate international transfers and, in certain instances, provide access to foreign currencies.
Not surprisingly, if you have an account with a small bank in a foreign jurisdiction and you need to send a transfer to another country, the bank may include an intermediary bank on the wire transfer instructions.
When an intermediary bank is included in wire instructions, it suggests that your bank either does not have a direct relationship with the receiving bank or does not have access to the currencies being sent (or received).
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Intermediary Bank vs Beneficiary Bank
When it comes to sending international wire transfers, there are four banks that can be involved in the process. That said, all four banks are not always required. Instead, the two intermediary banks may only be required if the accounts are being sent and received to and from smaller banks, meaning they need to be involved in order for the other banks to transact with one another.
Issuing Bank
The issuing bank is the bank where a transfer originates. For example, if you are sending funds to a family member in a different country from your bank account, then your bank would be the issuing bank.
Beneficiary Bank
The beneficiary bank is the bank to which the funds are being sent to. Using the example above, the family member that you are sending funds to would have an account at the beneficiary bank.
Intermediary Bank
Both the issuing bank and the beneficiary bank may have their own intermediary banks. Sticking with our example, both the issuing bank and the beneficiary bank may need to use intermediaries in order to send and receive foreign transactions.
In short, intermediary banks send and receive transfers on behalf of other banks, essentially acting as a third party that helps connects financial institutions with one another.
Why Should I Use Intermediary Banks?
In most cases, account holders do not have a choice on whether or not they will use an intermediary bank. Instead, the bank will provide them with wire transfer instructions, which may (or may not) include an intermediary bank.
When an intermediary bank is included in wire instructions, it is best practice to include these details when completing a wire.
Benefits of Intermediary Banks
Among the many benefits offered by an intermediary bank, one of the most important is that they ensure your transfers arrive efficiently at their intended destination, meaning they don’t get lost in transit.
Frequently Asked Questions
Below are three of the most common questions we receive from people looking into the intermediary bank meaning. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Is an Example of an Intermediary Bank?
An intermediary bank tends to be a large international bank, meaning it can facilitate large volumes of transactions. Examples of intermediary banks include Deutsche Bank, Lloyds Bank, and Citibank, just to name a few.
How Do I Find My Intermediary Bank?
In most cases, you can either find your intermediary bank details in the wire instructions provided at the time of account opening, through your online banking platform, or by contacting your bank directly.
Why Do You Need an Intermediary Bank?
You need an intermediary bank anytime you are sending or receiving funds to a country (or bank) that your bank does not have a relationship with or in. In other words, your bank is not capable of sending funds to your chosen destination. So, it needs to use the services of an intermediary bank to help complete your transaction.
This is common when dealing with a smaller international bank, meaning they have to rely on intermediary banks to support their customer’s transaction requirements.
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