Question 1

a) A Singapore importer bought a batch of good from an US exporter. The settlement currency was agreed upon. The two banks involved have mutual current accounts with each other.

For class register number 14 to 27, assume the payment by importer is in SGD.

Using the above example, explain the following by providing all the necessary details:

o From which banks perspective the current account is a Nostro Account?

o From which banks perspective the current account is a Vostro Account?

o Would the Nostro Account and Vostro Account used for this particular transaction be counted as 2 separate accounts? Or would it be just a single account? Please comment.

b) A Singapore importer issued a SGD local cheque to a foreign exporter in Indonesia. Besides avoiding foreign exchange risk, describe in detail the distinctive advantage for the importer in making payment using local cheques.