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Correspondent Banks
Every credit professional should understand that commercial banks have relationships with foreign banks. This knowledge will enable the credit manager to better utilize the credit information sources of its company's bank when making a credit inquiry about a customer. No two banks have the same type of relationship. A correspondent account is an account established by a domestic banking institution to receive deposits from, make payments on behalf of, or handle other financial transactions for a foreign financial institution. This allows foreign banks to conduct business and provide services to their clients in a foreign country without having to esablish branches in that foreign country.
An astute credit manager will know the strengths of its company's bank or banks and avail themselves of the bank's relationships with foreign banks to obtain information about customers if and when that is necessary to make a better informed credit decision, such as a decision about whether a foreign customer is a good candidate for open account credit terms.
© 2011 by Michael C. Dennis. All Rights Reserved