Introduction to Nostro Reconciliation

Nostro account is the record of the bank that has deposited money at another bank. It differs from standard demand deposit bank accounts in that it is held by financial institutions, and is normally denominated in foreign currency. Nostro means ‘our money that is on deposit at your bank’. These accounts are often used to simplify settlements of trade and foreign exchange transactions.

Nostro Reconciliation involves the matching of the debit and credit activity in the domestic bank’s account with the statement of the account provided by the nostro account holding bank. This matching is done by the Nostro Reconciliation module and depends on the matching criteria defined by the user, such as matching by value date, currency, amount, transaction reference and reporting un-reconciled postings. Nostro Reconciliation module is used across any module (in Temenos Transact) that uses nostro accounts for its transaction processing.

The following image shows the process map for Nostro Reconciliation.

Product Configuration

The nostro reconciliation module consists of the following processes:

Message capture for incoming SWIFT MT940 and MT950 messages
Capture of nostro ledger data in the form of MT940 messages diverted from DELIVERY module
Statement extraction from aforementioned messages into Temenos Transact files
Definition of matching parameters and controls
Automatic matching procedure
Manual matching procedure
Manual unmatching procedure
Manual statement input procedure

Nostro Reconciliation dependencies:

Customer application for creating customer (counter parties) records of nostro banks.
Account application for creating internal and nostro accounts meant for reconciliation purpose.
Accounting application for generation of ledgers and receiving statements from nostro banks.
Agency file for creating nostro agency arrangements.
Delivery module for sending and receiving statements, that is, MT940/MT950 from nostro banks for reconciliation.
Static tables like country and currency.

Nostro Reconciliation Parameter

The NR.PARAMETER is the main application for the reconciliation process. User should setup the incoming and outgoing requirements before the user can input and authorise this record.

One record is created for every company.
Specifies matching rules for reconciliation process.
Transaction codes for automatic matching process to be identified in Trans Type (transaction) field. This field allows determining how certain transactions are matched. For example, for items in SWIFT statement the user may wish to match miscellaneous transactions by value date and amount but matching cheques by amount only. The items are matched in the automatic matching process.
The code to be prefixed with N (for nostro) and for entries which are advised first by the statement starts with F followed by any of the following:
- BOE – Bill of Exchange
- BRF – Brokerage Fee
- CHG – Charges and other Expenses
- CHK – Cheques
- CLR – Cash Letter or Cheques Remittance
- COL – Collections
- COM – Commission
- DCR – Documentary Credit
- DIV – Dividends Warrants
- EQA – Equivalent Amount
- ECK – Euro Cheques
- FEX – Foreign Exchange
- INT – Interest
- LBX – Lock Box
- LDP – Loan Deposit
- MSC – Miscellaneous
- RTI – Returned Items
- SEC – Securities
- STO – Standing Order
- TCK – Traveller’s cheque
- TRF – Transfer
- VDA – Value Date Adjustment

Match Field Stmt and Match Field Ledger fields contain values from NR.STATEMENTS, which should be matched with the ledger from the system and statement from the nostro bank in case of automatic matching. This is a multi-valued field and any kind of combinations for matching processing can be specified.
Split Items field allows to determine whether item splits are allowed in the manual matching process. Item splits are not allowed for auto matching process. This is used in cases where amounts are received with unexpected charges deducted. Larger amount can be allowed to split into two items. Main amount is matched with the statement amount received and the charge amount is to be left as outstanding one which is awaiting resolution. This is result of manually matching unequal amounts and acknowledging override messages.
Number of days that a matched item needs to be in live file before moving into history file is specified in Retention Days field.
T24 Location field defines the place from where these statements are located.
External Location field defines the place from where these statements are located.
Provides for usage of local reference fields to facilitate local customisations to cater to specific bank requirement.

Illustrating Model Parameters

This section covers the high-level specifications required for Nostro Reconciliation (NR) Module.

S.No.	Parameters	Description
1.	`NR.PARAMETER`	This application allows the user to specify matching rules for reconciliation process. It also allows the user to define transaction codes, which determine how transactions are matched. User can also define statement fields and ledger fields, which must be matched with the Nostro bank’s ledger of the system and statement. User can define retention days. The retention days are the number of days that a matched item must be in the LIVE table before moving it to HISTORY. User can define Temenos Transact location and external location where the NR statements from the Nostro bank must be located.
Apart from the specification in NR module, the following setup is also required in Delivery (DE) module.
1.	`DE.INTERFACE`	The delivery interface parameter record is required to instruct the statement decoding process.
2.	`DE.CARRIER`	This application allows the user to define the formats, interface and address required for the reconciliation carrier record.
3.	`DE.ADDRESS`	This application allows the user to define the name and address of the bank’s customer for reconciliation delivery carrier record. User can also define delivery addresses for other carriers like SWIFT, TELLEX and special postal address.
4.	`DE.PRODUCT`	This application allows the user to define a record for each Nostro reconciliation account to send messages to reconciliation carrier.
5.	`DE.PARM`	The delivery parameter application allows user to shut down the reconciliation carrier control modules and inward, outward formatting modules.
6.	`DE.MESSAGE`	This application allows the user to define the contents of message type MT940 and MT950 that used for reconciliation.
7.	`DE.SWIFT.DIVERSION`	This application allows the user to divert SWIFT messages MT940 and MT950 from the SWIFT carrier to the diversion file for reconciliation purpose.

In this topic

Products

Ecosystem

Technology

Other Product documentation

Introduction to Nostro Reconciliation

Product Configuration

Illustrating Model Parameters