Talk:Nostro and vostro accounts

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Separation

The separation into "vostro" and "nostro" depending on the currency does not correspond to the definition of nostro and vostro accounts in other wikipedias (e.g. German). There a nostro account is "our account" at another bank, whereas a vostro account is an "account of another bank" at our bank. As the names are based on the Italian language, where "nostro" means "our" and "vostro" means "yours", I think the current explanation referring to currencies is wrong. 195.250.46.22 12:00, 15 February 2007 (UTC)[reply]

Currently, "vostro" and "nostro" in italian languages as know as "avere" ("to have", on le right side) and "dare" ("to give", on the left side). — Preceding unsigned comment added by 2.224.3.57 (talk) 20:02, 7 February 2013 (UTC)[reply]

Conventions, Credits and Debits

"A bank counts a nostro account with a credit balance as a cash asset in its balance sheet. Conversely, a vostro account with a credit balance (i.e. a deposit) is a liability, and a vostro with a debit balance (a loan) is an asset.Thus in many banks a credit entry on an account ("CR") is regarded as negative movement, and a debit ("DR") is positive - the reverse of usual commercial accounting conventions."

1. This contradicts the first sentence; if an account with a credit balance is a cash asset, a CR entry on account would increase the asset... A good thing, no?

2. If this section is to be included, reference to the accounting perspective of these credit and debit accounts should be made. I'm not sure if it really makes sense at present. How I see it:

Bank A's nostro account, ie the account it holds at Bank B, would surely be recorded in Bank A's ledger as a debit balance (if it had funds deposited in its nostro with Bank B, and was therefore an asset). Bank B would issue a statement to Bank A, showing a credit balance, as anyone's bank would if they had funds deposited. Bank B's statement is from Bank B's accounting perspective, it has a credit balance (a liability) in its accounting records of its relationship with Bank A.

This would be in line with how any commercial entity would account for funds held on deposit at a bank.

Can someone with some accounting knowledge confirm? Would suggest a rewording but I don't really have the knowledge to explain it properly... came here to find out more about these damn accounts! Perhaps the paragraph shouldn't really be in there at all? HJW (talk) 19:20, 15 November 2010 (UTC)[reply]

The counter-intuitive conventions of CR/DR at banks is all about computerised book-keeping. It's because a Nostro has to be the mirror image of the "real" account at the other bank in order for a trial balance to work. Think of a Nostro as quantum tunnelling for money. It provides a way for a payment to apparently move from an account outside my book-keeping system to an account within it, like this

  your a/c -$-> my a/c somewhere else  - - -  Nostro of my a/c -$-> your a/c with me

Say you want to repay $10 on your $ loan from me, so you deposit $10 into my $ account with a bank in some country where $ is legal tender - you can't do it here, we are only allowed to do customer transactions in groats. Your wallet goes -$10, my balance at that bank goes +$10 from $1,000,000 to $1,000,010, and everything still sums to 0. Back on my internal books, I move $10 from my NOSTRO of my own $ account to my VOSTRO of your $ loan; my NOSTRO goes -$10, your $ loan goes +$10 (from -$10,000 to -$9,990) and it all still balances here as well. The actual spondulicks is still in a big bag of $'s over at the corresponding bank; but I have recorded the $10 CR movement on my account with them, and I have noted the arrival of your $10 repayment for internal score-keeping.

It doesn't matter which way round you do it, but either the Nostro or the Vostro has to represent CR as -ve for trial balances to work. At least one bank I know has Vostro CR -ve, supposedly so they don't have to invert everything for the balance sheet (remember, deposit = liability, loan = asset?). I think Nostro CR -ve is more intuitive, but either way a CR balance is still CR. Even though the Nostro balance is -1,000,010.00 inside the computer, because we know it is a Nostro it will be printed or displayed as $1,000,010.00 CR, so that when some poor grunt checks it against the statement their head doesn't explode.

And I guess that is why we still use CR/DR for accounts instead of +/-, because whatever the underlying arithmetic, CR still means more dosh and DR means less. Swiveler (talk) 23:54, 22 June 2011 (UTC) edit Swiveler (talk) 08:53, 1 August 2011 (UTC)[reply]