Investments, tenth edition

  Bankers’ Acceptances 

 A     banker’s  acceptance    starts as an order to a bank by a bank’s customer to pay a sum of 

money at a future date, typically within 6 months. At this stage, it is similar to a postdated 

check. When the bank endorses the order for payment as “accepted,” it assumes respon-

sibility for ultimate payment to the holder of the acceptance. At this point, the acceptance 

may be traded in secondary markets like any other claim on the bank. Bankers’ acceptances 

are considered very safe assets because traders can substitute the bank’s credit standing for 

their own. They are used widely in foreign trade where the creditworthiness of one trader 

is unknown to the trading partner. Acceptances sell at a discount from the face value of the 

payment order, just as T-bills sell at a discount from par value.