bankers’ acceptance investment & finance definition

A short-term credit letter drawn on a bank that guarantees payment of a bill by the bank. Bankers’ acceptance letters generally are used in export and import transactions. They are termed accepted when a bank writes on the draft its agreement to pay it at maturity, using the word accepted. A bank may accept the draft for either the drawer or the holder. Unlike a more traditional loan, a bankers’ acceptance doesn’t necessarily reduce a bank’s lending capacity, because the bank can raise funds by selling the acceptance. The acceptance is nevertheless an outstanding liability of the bank and is subject to reserve requirements from the Federal Reserve.