Table of Contents
What Recipient and Correspondent Banking Fees Are
Why These Fees Exist in the First Place
How Correspondent Banks Facilitate Cross-Border Transfers
Recipient Bank Fees and Incoming Processing Charges
How Fees Are Allocated: OUR, SHA, and BEN
Why Fee Transparency Is Often Poor
How These Fees Affect What the Recipient Actually Gets
Real Examples of Correspondent Banking Paths
Differences Between Correspondent and Intermediary Banks
Tips to Reduce Recipient and Correspondent Fees
Summary
When you send money internationally using a traditional bank transfer, additional fees can be applied by banks other than your own. Correspondent banking fees are charged by third-party banks that help route your payment when the sender’s bank and receiver’s bank lack a direct relationship. Recipient or receiving bank fees are charged by the beneficiary’s bank for processing the incoming transfer. These fees can be opaque and unpredictable and can reduce the amount your recipient receives unless you choose the correct fee allocation option.
What Recipient and Correspondent Banking Fees Are
Recipient and correspondent banking fees are costs levied by banks involved in an international transfer chain that are not your sending bank.
Correspondent banking fees are charged by intermediary or correspondent banks that act as middlemen when your bank does not have a direct relationship with the beneficiary bank. These fees are typically deducted during processing.
Recipient bank fees are charged by the bank receiving the funds on behalf of the beneficiary. This fee is usually deducted by the recipient’s bank when it credits the money to the receiver’s account.
Why These Fees Exist in the First Place
International banking networks are complex. No bank maintains direct settlement relationships with every other bank in every country. Correspondent banks fill that gap by offering connectivity across jurisdictions and currencies. Because correspondent banks provide a service — essentially connecting two banks that otherwise cannot communicate financially — they charge for it. Likewise, recipient banks charge for processing incoming international transactions, bookkeeping, and compliance checks.
How Correspondent Banks Facilitate Cross-Border Transfers
A correspondent bank is a third-party financial institution that helps two unrelated banks settle funds. If your local bank does not operate in the destination country or currency, it will route the payment through a correspondent bank that does. The correspondent bank has accounts (often called nostro/vostro accounts) with both the sending and receiving banks, allowing settlement without either bank needing direct access to foreign systems.
For example, if you send money from Bank A in one country to Bank B in another, and neither has a direct link, a correspondent bank C may be used. Bank A sends funds to bank C’s account at Bank A, C debits its own records, then sends to Bank B’s account at C. Each step can carry a fee that may be passed on.
Recipient Bank Fees and Incoming Processing Charges
In addition to correspondent fees, the beneficiary’s own bank may charge incoming processing or credit fees. These fees compensate the bank for handling the transfer, converting the currency if necessary, and crediting the funds to the recipient’s account. In many countries, banks publish these charges as part of their tariff, but recipients often do not see them until the transfer arrives.
Recipient fees vary widely by bank and jurisdiction. Some banks absorb small incoming transfer fees for certain account types, while others apply flat charges or percentage-based fees.
How Fees Are Allocated: OUR, SHA, and BEN
When initiating a SWIFT or wire transfer, you typically encounter three fee allocation options:
OUR means the sender pays all fees — including correspondent and recipient bank fees — so the beneficiary receives the full amount you sent.
SHA means the sender and recipient share the fees. Your bank’s sending costs are paid by you, while intermediate and recipient bank fees are deducted from the payment.
BEN means the beneficiary pays all fees — correspondent and receiving. The fees are simply deducted, and the recipient receives a reduced amount.
The choice you make here affects how much your recipient actually gets, and who bears the cost.
Why Fee Transparency Is Often Poor
Banks do not always disclose correspondent or recipient fees up front because they do not control the costs charged by third-party banks. Even if your bank charges a clear outgoing fee, the actual total cost of the transfer may be higher due to correspondent and receiving charges that are only visible when the funds are credited. This makes it hard to predict the true cost in advance.
How These Fees Affect What the Recipient Actually Gets
Unpredictable correspondent or recipient fees can lead to the beneficiary receiving less than the amount you intended. For example, if you send $1,000 and two correspondent banks each deduct $20, and the receiving bank deducts $15, your recipient might only receive $945 unless you paid the correspondent fees upfront using the OUR option.
Real Examples of Correspondent Banking Paths
In real world transfers, the chain of banks involved can vary widely. A transfer from a UK bank to a major Japanese bank might involve only two institutions, which can reduce fees. But a UK bank sending to a smaller bank in another country may require multiple correspondent banks, increasing the cumulative charges.
The exact route and fees are rarely visible to the sender, but the more banks involved, the more fees can stack up.
Differences Between Correspondent and Intermediary Banks
Although often used interchangeably, there are subtle differences:
Correspondent banks are part of formal bilateral relationships and often handle multi-currency operations. Intermediary banks may step in on a transaction-by-transaction basis and may be used when a direct correspondent relationship does not exist. For practical purposes in transfer cost, both can add fees.
Both types of banks act as middlemen, but correspondent bank agreements are usually more predictable in pricing for larger institutions, whereas intermediary fees can vary with each transfer.
Tips to Reduce Recipient and Correspondent Fees
Choose the OUR option if you want your beneficiary to receive the full amount, with you paying all fees.
Compare different banks or providers, as fee structures differ significantly.
For regular international payments, consider specialist money transfer services that use local clearing instead of correspondent banking. These often have more transparent pricing and lower total cost.
Ask your bank for an estimate of potential correspondent bank fees before confirming the transfer.
Summary of Key Takeaways
Recipient and correspondent banking fees are separate from the sending bank’s charges.
Correspondent banks enable transfers when direct relationships don’t exist.
Recipient banks may also deduct their own incoming fees.
Fee allocation options significantly affect how much the beneficiary receives.
Fees are often opaque and unpredictable until after the transfer.
Frequently Asked Questions
What are correspondent banking fees
Correspondent fees are charges by third-party banks that help route your international transfer when your bank and the recipient’s bank lack a direct relationship.
Do correspondent banks charge every time
Not always; it depends on whether correspondent banks are needed and how many are involved.
Can the recipient avoid recipient bank fees
Some banks waive incoming transfer fees for specific account types or customers, but it depends on the recipient’s bank policy.
What does OUR, SHA, BEN mean in transfer fees
OUR means sender pays all fees, SHA means fees are shared, and BEN means the recipient pays all fees deducted from the transfer amount.
Are correspondent bank fees predictable
They are often not predictable in advance because banks do not disclose third-party fees ahead of processing.
Sources
https://www.papayaglobal.com/blog/understanding-intermediary-bank-fees-for-international-wire-transfers/
https://www.investopedia.com/terms/c/correspondent-bank.asp
https://www.hsbc.co.in/international/remittance-fees-and-charges/
https://www.commbank.com.au/personal/international/international-money-transfer/bank-fees.html
