Banker's acceptance


Banker's acceptance are bank and issuer guaranteed short-term debt certificates used to facilitate foreign commerce transactions that are sold at a discount and does not bear interest. The debt certificate's face value is paid at maturity.

If an exporter does not want payment in cash, a letter of credit will be issued by the exporter's bank to the importer's bank account. When the letter of credit is cleared and accepted by the importer's bank, it will be forwarded to another bank that originally issued the letter of credit. The bank that issued it will guarantee the payment to the exporter's bank when the debt certificate matures.

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