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Loan and Mortgage Terms Glossary |
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Banker's Acceptance:
A draft drawn on a bank, which when accepted by the bank, constitutes the bank's obligation to pay the draft writer's bills from a specified creditor when the bills are due. The bank literally stamps "accepted for payment by (name of bank) on (date)" across the face of the draft. Acceptance converts a depositor's "order to pay" into an unconditional "promise to pay" by the accepting bank. Bankers acceptances are effectively a guaranty of payment for a purchase and are usually used in financing the import, export, transfer or storage of goods, and qualify as liquid assets when held by a thrift institution.
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