Intermediary Bank (Transfers)

When making a bank transfer (telegraphic transfer) an “Intermediary Bank” is the name given to the financial institution that performs the role of bridging the international gap between the remitting institution and the beneficiary institution when the two banks do not have an existing relationship.

Intermediary banks commonly serve the remittance needs of smaller (beneficiary) banks and transactions involving currencies that are foreign to the beneficiary bank. When two financial institutions do not having a remittance relationship but need to transact, the remitting bank will source an intermediary bank that has terms with both banks via the SWIFT network. The intermediary bank charges a fixed fee to act as the intermediary bank and for this reason people remitting money internationally are often puzzled as to why the transfer arrives light, even after subtracting the remittance fees of the remitting bank. In many instances, banking and foreign exchange customers will not be made aware of who the intermediary bank will be for their transaction and it is not uncommon for staff at retail banks to be completely unaware of who the intermediary for a given transaction will be.

Mrs. Client wishes to send 100,000 GBP to her sons regional bank in Japan where he lives, to help him with the downpayment for a house now that he has got married. Her banker remits the money from her account at Barclays bank in London, charging a fixed fee of 30 GBP to make the transfer. As Barclays does not have terms with the small Japanese bank, they determine to use Bank Of Tokyo Mitsubishi as the intermediary bank. Bank of Tokyo charges the equivalent of 3,000 JPY to act as the intermediary, and subtracts that from the remittance amount. Mrs. Client’s son receives slightly less than he expected after googling what 100,000 GBP would be in Japanese Yen. The total he receives is the amount remitted in pounds, minus the 30 GBP taken by Barclays, minus the 3,000 JPY equivalent taken by Bank of Tokyo, then exchanged to Japanese Yen at the (rather unfriendly) exchange rate set by the small Japanese Bank.