Banker's acceptance

A banker's acceptance arises when a bank guarantees (or accepts) corporate debt, usually when it issues a loan to a corporate customer and then sells the debt to investors. Because of the bank guarantee, a banker's acceptance is viewed as an obligation of the bank. If the bank has a good reputation, the acceptance can be resold in an open market, at a discount to its face value. A banker's acceptance is considered to be a very safe asset, and is used extensively in international trade.

A bank will only issue an acceptance when it is comfortable with the issuer's ability to redeem the debt when due.

Related Courses

Corporate Cash Management 
Corporate Finance 
Treasurer's Guidebook