Banker's Acceptance (Noun)
Meaning
Banking: a time draft drawn on and accepted by a bank.
Classification
Nouns denoting possession and transfer of possession.
Examples
- A banker's acceptance is used primarily in international transactions to eliminate the risk that a buyer will not pay for goods shipped by a seller.
- The seller then presents the banker's acceptance to the bank for payment, which is typically made in the form of a draft.
- The bank accepts the draft and agrees to pay the face amount at maturity, thereby assuming the credit risk of the transaction.
- A banker's acceptance is essentially a time draft that has been accepted by a bank, indicating that the bank has agreed to pay the draft when it matures.
- Banker's acceptance allows the seller of goods or services to retain the ability to use the funds provided by a buyer's letter of credit without waiting for the payment to be collected.