Banker's acceptance

Banker's acceptance

A banker's acceptance (also called bankers acceptance or BA) is an order to pay a sum of money at a certain date. The BA is created by a banking customer and provided to a third party. The third party presents the BA to the bank; when the bank "accepts" the BA, it is assuming responsibility to make the specified payment. The BA is now a bank-guaranteed obligation and can therefore be traded on the secondary market. BAs are commonly used in international trade, where parties to a transaction are unwilling to offer credit terms.