Econmics
Essay by review • November 22, 2010 • Study Guide • 296 Words (2 Pages) • 1,067 Views
1. THE CREATION OF A BANKERS ACCEPTANCE
Acceptances arise most often in connection with international trade: U.S. imports
and exports and trade between foreign countries.1 An American importer
may request acceptance financing from its bank when, as is frequently the case
in international trade, it does not have a close relationship with and cannot
obtain financing from the exporter it is dealing with. Once the importer and
bank have completed an acceptance agreement, in which the bank agrees to
accept drafts for the importer and the importer agrees to repay any drafts the
bank accepts, the importer draws a time draft on the bank. The bank accepts
The author, former assistant economist at the Federal Reserve Bank of Richmond, would like
to thank Lawrence Aiken of the Federal Reserve Bank of New York, Walker Todd of the
Federal Reserve Bank of Cleveland, and Tim Cook and John Walter of the Federal Reserve
Bank of Richmond. The views expressed in this article are those of the author and do not
necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve
System.
1 Although acceptances may be created by entities other than banks--such acceptances are
referred to as "trade acceptances"--the term "acceptance" in this article will refer to bankers
acceptances only.
Federal Reserve Bank of Richmond Economic Quarterly Volume 79/1 Winter 1993 75
76 Federal Reserve Bank of Richmond Economic Quarterly
the draft and discounts it; that is, it gives the importer cash for the draft but
gives it an amount less than the face value of the draft. The importer uses the
proceeds to pay the exporter.
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