What is the function of a Correspondent Bank?

The function of a Correspondent Bank is accurately captured by the option that describes it as a bank serving as an intermediary for banking services. Correspondent banks play a pivotal role in the global banking system by enabling financial transactions between banks that do not have a direct relationship. This occurs particularly in international trade and finance where one bank needs to interact with another bank in a different country. The correspondent bank facilitates these transactions by providing services such as wire transfers, currency exchange, and other banking functions that are necessary for the smooth operation of international payments.

By acting as an intermediary, correspondent banks allow smaller banks that may not have the capability or infrastructure to handle international transactions to still participate in global finance. They essentially extend the reach of financial institutions, enabling them to serve their clients better, especially in cross-border transactions where they may not have a direct banking partner.