Banker's Acceptance

Time draft drawn on and accepted by a bank, the customary means of effecting payment for merchandise sold in import-export transactions, and a source of financing used extensively in international trade. See also Letter of Credit.

Time draft drawn by a business firm whose payment is guaranteed by the bank's "acceptance" of it. It is especially important in foreign trade, when the seller of goods can be certain that the buyer's draft will actually have funds behind it. Banker's acceptances are money market instruments actively traded in the secondary market.