Bank of America Corp. has joined a real-time nostro foreign-exchange database developed by Cable and Wireless PLC.
Nostro accounts are accounts that a bank holds with a foreign bank. They are often in the foreign bank's local currency.
The British telecommunications company, which is expected to announce the agreement today, said Bank of America will be the third trillion-dollar U.S. bank to participate in the network.
Cable and Wireless said B of A will feed its nostro account data for U.S. dollar accounts into the network's shared database, as well as information on other currencies used in the Charlotte company's international branch network.
Bank of America also plans to sell the pooled information to its regional correspondent banks and corporate clients.
Karen Healy, a senior vice president in B of A's global treasury services unit and its head of financial institution foreign-exchange product management, says in the Cable and Wireless press release due out today: "We recognize our clients' growing need for efficient delivery channels, providing real-time information and improving the reconciliation process. We want to expand our existing suite of real-time information streams."
The shared nostro database constantly collects information on foreign-exchange balances that banks have in accounts with one another. JPMorgan Chase & Co. and Citigroup Inc. have used the service since mid-2003 to share information about foreign exchange, commercial payments, and securities settlements.
Gerard Hammarlund, the head of sales for financial services at Cable and Wireless, said the B of A addition shows "the momentum that we're gaining with real-time nostro, especially in the U.S. market."
The U.S. dollar "is the dominant currency in the world," Mr. Hammarlund said in an interview. "Real-time information is the future. It gives the user a better view of what's going on in their business."
Breffni McGuire, a senior analyst in the global payments practice at TowerGroup, the Needham, Mass., market research unit of MasterCard International, said B of A's joining the database might contribute to what she called a "network effect," where information networks become more valuable as more market participants begin to use them.
"It's certainly good news for Cable and Wireless, but it's good news for the industry as well," Ms. McGuire said in an interview. "There's a clear trend in the banking industry toward real-time information about payments."
Banks have been "very slow" to join Cable and Wireless' information network since its introduction in 2001, Ms. McGuire said. It is difficult to persuade them to cooperate in multilateral initiatives, she noted.
The real-time system will not achieve its full potential until users can reconcile the nostro information against other liquidity-management systems to track their cash flows through the day, Ms. McGuire said.
"That is important," she said. "You have to be able to do something with the information after you get it."
A growing number of vendors are offering systems to provide such reconciliation, Ms. McGuire said. "It's a chicken-and-egg thing. Vendors move when they see their customers are going to want it."
