Forgot your password?
Please enter your email & we will send your password to you:
Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
When the seller/beneficiary draws under a usance or time documentary credit, the draft is a usance or time draft, and, if the documents comply, the issuer must accept the draft and create a banker’s acceptance. In some cases, the nominated bank may be authorized to accept the draft. A bank that is nominated to accept drafts and elects to do so takes responsibility for paying at maturity. This is similar to the obligation of a confirmer, but with no commitment in advance to accept the drafts. The decision is based on an assessment of the risk of not being reimbursed by the issuer, as the obligation to pay becomes unconditional once the draft is accepted. Acceptance, whether by the issuer or a bank nominated to accept drafts, is a banker’s acceptance, an investment vehicle so valuable that the nominated bank is able to sell it in the money markets on behalf of the seller or may even buy it itself. Banks often buy their own acceptances, knowing that they represent their own obligations to pay when they come due. In short, the draft is a valuable piece of paper when it is drawn under a documentary credit and accompanied by documents that comply with the terms and conditions of the credit.