Legal Definitions - respondent bank

A respondent bank is a financial institution that receives payment instructions from another bank, often referred to as the "originating" or "remitting" bank, to process a transaction for a customer. It acts as an intermediary, typically in a different country or jurisdiction, to facilitate the transfer of funds to the ultimate beneficiary's account. The respondent bank does not have a direct relationship with the customer who initiated the payment but processes the transaction on behalf of the originating bank.

Here are some examples to illustrate the role of a respondent bank:

• International Personal Remittance: Imagine David in Canada wants to send money to his sister, Emily, who lives in Australia. David initiates the transfer through his Canadian bank, Bank A. Emily has an account with Bank B in Australia. Bank A sends the payment instructions and funds to Bank B. In this scenario, Bank B is the respondent bank because it receives the instructions from Bank A and then credits Emily's account. Bank B is responding to the request from Bank A to complete the international transfer.

• Business Payment to an Overseas Supplier: A clothing company in the United Kingdom, "Global Fashions Ltd.," needs to pay its fabric supplier, "Silk Road Textiles," located in India. Global Fashions instructs its UK bank, Bank C, to make a payment of £50,000 to Silk Road Textiles' account. Silk Road Textiles banks with Bank D in India. Bank C sends the payment details and funds through the international banking network to Bank D. Here, Bank D is the respondent bank. It receives the payment order from Bank C and credits the account of Silk Road Textiles, fulfilling the payment request initiated by the UK company through its bank.

• Interbank Funds Transfer: A small regional bank in Brazil, "Local Bank X," has a client who needs to receive a large payment in Euros from a client of a German bank, "EuroBank Y." Local Bank X does not have a direct account with EuroBank Y, nor does it maintain a Euro account directly in Germany. Instead, EuroBank Y sends the Euro payment instructions to a larger international bank, "Global Bank Z," with which both EuroBank Y and Local Bank X have correspondent relationships. Global Bank Z then processes the payment and credits Local Bank X's account. In this specific leg of the transaction, if Global Bank Z then sends the funds to Local Bank X, Local Bank X acts as a respondent bank by receiving the funds and instructions from Global Bank Z to ultimately credit its client's account.