Bankers acceptances are short-term credit investment created by a non-financial firm and guaranteed by a bank.  Bankers’ acceptances are drafts drawn by a commercial firm upon a bank and accepted by the bank.  The drafts instruct the bank to pay a designated party a certain sum of money at a specified time in the future.  The bank’s acceptance means that the bank is guaranteeing the availability of the funds at the maturity of the acceptance.

Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the bearer of the draft.  Upon acceptance, which occurs when an authorized bank accepts and signs it, the draft becomes a primary and unconditional liability of the bank.  If the bank is well known and enjoys a good reputation, the accepted draft may be readily sold in an active market.  The bank may hold the acceptance in its portfolio or it may sell, or rediscount, it in the secondary market.  Bankers’ acceptances are traded at a discount from face value on the secondary market.  Bank Notes are similar to Bankers Acceptances and are obligations of banks, but are not deposits, and therefore are not insured by the FDIC.  An active secondary market exists for Bank Notes to be bought and sold in the money market.

No user commented in " Money Market Funds Investments – Bankers Acceptances "

Follow-up comment rss or Leave a Trackback

Leave A Reply

 Username (*required)

 Email Address (*private)

 Website (*optional)