What is the primary function of a correspondent bank?

The primary function of a correspondent bank is to facilitate international payment services. Correspondent banks act as intermediaries that enable banks in different countries to handle transactions and provide services to each other, particularly when they lack a direct relationship or presence in a foreign market. This is essential for cross-border transactions involving different currencies and regulatory environments.

These banks maintain accounts with one another, allowing them to process money transfers and clear payments between financial institutions. They play a critical role in the global banking system by ensuring that funds can move smoothly and efficiently across borders. This capability is especially important in facilitating trade and financial transactions on an international scale.

The other options do not align with the primary functions of correspondent banks. While offering individual banking services is typically handled by retail banks, managing domestic payments focuses on transactions within a single country's banking system, and regulating payment systems refers to oversight responsibilities that are generally carried out by national or regional financial authorities rather than by correspondent banks.