Bankers acceptance

The results show that whereas the highest contribution comes from the Treasury Bills with a t-value of 8.484, the least contribution however, is from treasury certificates with a t-value of 0.311.Others are bankers' acceptances, certificates of deposits and commercial papers with t-values of 1 405, 1.147 and 0.930 respectively (see tables 4.4, 4.5).This order of importance is depicted thus;

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A short-term credit instrument created by a nonfinancial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market on the basis of the credit quality of the guaranteeing banks. These instruments have become a popular investment for money market funds. Also called acceptance. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved. Want to thank TFD for its existence? Link to this page: banker's acceptance

Basically, it is a time draft that a business can get from the bank as an extra cover against counterparty risk. Here bank promises to pay the exporting firm a definite amount on a specific date after it recovers its money by debiting the importer’s account. In simple words, you can understand BA as a post-dated check from a bank. Table of Contents • • • • • • • • • • Bankers Acceptance History Bankers acceptance is not a new concept and dates back to the 12 th century. During the 18 th and 19 th century, Sterling bankers acceptance were very active in London. In 1913, the United States Federal Reserve was formed, and one of its objectives was to encourage domestic bankers acceptance market to take on London’s market. Fed aimed to boost United States trades and make the US banks more competitive. At the time, National banks were given the authority to accept time drafts, while the Fed had the authority to take over some eligible bankers acceptances. The eligibility criteria included bankers acceptance of finance self-liquidating transactions with a maturity under six months. Fed, however, no more buys BA. Still, the eligibility requirement holds significance as there are no reserve requirements if a bank sells an eligible acceptance. How BA Works? Bankers acceptance could be in the form of drafts, For instance, an importing company looks to buy goods from an exporter and approaches the bank because the seller is not granting credit. The importer and the bank execute an acc...

Harry O'Keefe of O'Keefe's Irish Imports wanted to order a bunch of shamrocks hats and tee shirts for his inventory. With St. Patty's Day coming up, O'Keefe knows he needs to get the merchandise delivered quickly. Being a keen businessman, he also wants a good deal. O'Keefe took to the Internet and found Cheap Holiday Decor, Inc. is offering four-leaf clover swag cheap. O'Keefe was as happy as a leprechaun until he made contact with the company. The company is located in China and has had no prior dealings with O'Keefe. Both parties were skeptical about how to make a risk-free payment for the shamrocks. Let's break it down. O'Keefe wants to purchase products from Cheap Holiday Decor but is not comfortable sending money to a party whom he does not know. The salesperson at Cheap Holiday Decor wants the business but does not want to take a risk to send product to a business he never dealt with. This is where the bank comes in. There are several advantages to using a banker's acceptance for international purchases. For the seller, the bank represents a solid ground for payment. The bank ensures that payment will be made based on the time draft. For the buyer, being backed by a bank will entice other sellers to solicit business, giving the buyer more options for purchasing products. The interest charged on banker's acceptances is also low, making it the right economic choice. The buyer also does not have to have liquid cash right away, freeing up money for other purchases.

American Heritage® Dictionary of the English Language, Fifth Edition. Copyright © 2016 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved. Want to thank TFD for its existence? Link to this page: bankers' acceptance (d) Sell and Buy Back Agreement (SBBA), which involves Bay' al-'inah based transactions; (e) Islamic Accepted Bills (same as Bankers' Acceptance) with Murabahah and Bay' al-Daynas the two underlying contracts; (f) Negotiable Islamic Debt Certificate (NIDC) with Bay' al-'inah as underlying contract, etc.