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Finance: What is a Banker's Acceptance Note? 205 Views


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Description:

What is a Banker’s Acceptance Note? Banker’s acceptance notes are short-term debts that companies can issue; they differ from general debt offerings because a bank backs them. Because a bank backs them, they are more or less considered money market funds and are traded as such.

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Transcript

00:00

Finance a la shmoop, what are bankers acceptance notes and cashier's checks ok

00:09

so bankers acceptance note what is it well it's kind of a t-bill but with [Guy holding up the note]

00:13

fewer calories that is a bank takes on the risk or promise of a future payment

00:18

to be made to a creditor and it's you know backed by the bank and it's kind of [The bank and government building behind the note]

00:24

backed by the federal government sorta sound weird well it is bankers

00:27

acceptance notices are generally used in foreign trade where the two parties well

00:32

just don't trust each other think about it like an escrow account when you buy a [People taking out a for sale sign]

00:36

home the funds get released once it's confirmed that the home does not in fact [Bars covering a vault of money open]

00:41

have nuclear waste under it the gal who says she's the owner of the home is in

00:46

fact the owner and the forward costs of taxes have all been paid like it's a [Escrow account checklist]

00:50

good sale the home's legally available to be sold in fact and after all the [Sold sticker is put on the sale sign]

00:54

boxes have been checked well then the money releases from the bank to the

00:58

seller and all's good while bankers acceptance notes work in [Money going to a person from the bank]

01:01

the same fashion like the shipment of Chinese tow traps way more comfortable

01:05

than the finger version was in fact found and picked up at the loading dock [Someone putting their finger into the trap]

01:09

brought back to the factory and you know tested on chimps sorry Pete oh we're

01:14

just keeping it real at that point the bank pays the foreign bank and while [Protesters]

01:17

everyone's happy ish why pay the extra fees for a system to work this way like

01:22

banks don't pay banks for free well because banks generally quote know each

01:26

other unquote better than individuals know

01:29

each other across foreign borders US banks trade with banks in whatever Stan [Money going across a map of the Earth]

01:34

all the time even when US banks have no idea where whatever stand is or what it

01:40

whatever stands for then you've got the kissing cousin of the bankers acceptance

01:43

note the cashier's check well the cashier's check is guaranteed

01:47

by the bank and drawn against the bank's own cash reserves that check is signed

01:52

by a cashier as if the bank itself is buying whatever product is being paid

01:56

for with a cashier's check the bank is the entity fully responsible for paying [Tow traps going to the bank]

02:01

that amount and because of this quote extremely guaranteed safety unquote

02:06

cashier's checks are common in complex or expensive transactions like buying a

02:11

home or setting up an initial brokerage so that the odds of the monkey business

02:16

happening when it comes time to collect the bananas are low and this is why [Monkeys running around with bananas]

02:20

like bananas cashier's checks have appeal... [Guy holding a banana skin in one hand and a cashier's check in the other]

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