Acceptor (Acceptance) Definition
An acceptor refers to a third party who consents to the payment of a draft or bill of exchange. An acceptor, a drawee and a drawer are the three parties involved in a bill of exchange.
The third party is the individual that accepts to pay for the bill of exchange on or before its maturity date. The acceptor makes a formal acceptance of this responsible by signing on the bill.
A Little More on What is an Acceptor
Banks or financial institutions often play the role of an acceptor in a bill of exchange. They take responsibility for the payment of checks or credits on or before the maturity date. For example, a bank can act as an acceptor of a check drawn and takes responsibility for payment. Check the illustration below;
Company A pays Company B through a check drawn against Bank BF and accepted by Bank BF. Once Company B presents the check drawn by Company A to Bank BF, the banks consents to pay the check, being the acceptor of the bill of exchange.
Acceptor and Other Commercial Banking Services
Commercial banks and other financial institutions that act as acceptors in a bill of exchange do not only take responsibly for checks. These institutions perform other functions such as acceptance of deposits, and offering of personal loans, business or mortgage loans. They also offer financial products such as certificates of deposits (CDs).
Oftentimes, loans are issued when the borrower has a collateral, in the case of mortgage loan, if a borrower fails to make payment at the scheduled time, the bank can claim the property. Furthermore, financial institutions derive revenue from interests charged on loans. Interests charged in loans is often smaller than interest given to customers who make deposits in the banks.
Acceptor, Commercial Banks, and Capital Requirements
It is important that a financial institution meets the laid down capital requirement before acting as an acceptor in a bill of exchange. The capital requirements for financial institutions are set by agencies like the Federal Reserve Board, the Bank for International Settlements and the Federal Deposit Insurance Corporation. Failure to meet this capital requirement means that the bank does not have enough fund to honor its responsibility as an acceptor.
Capital Requirements ensure that banks are solvent enough to take responsibility for payment of a bill of exchange. Dodd-Frank Act was passed in 2010, after the financial crisis of 2008. This act ensured that banks maintain the required capital to stand as acceptors and not default payment.
Reference for “Acceptor”
Academics research on “Acceptor”
Accounting Standards for Business Enterprises No. 26—Reinsurance Contracts, Riccardi, L. (2016). Accounting Standards for Business Enterprises No. 26—Reinsurance Contracts. In China Accounting Standards (pp. 199-206). Springer, Singapore. Article 1 In a bid to provide regulation on the recognition and evaluation of reinsurance contracts, and the presentation of crucial information, the present guidelines are designed in line with the Accounting Standards for Enterprises-Basic Standards.
Rights of Holder of Bill of Exchange against the Drawee, Aigler, R. W. (1924). Rights of Holder of Bill of Exchange against the Drawee. Harv. L. Rev., 38, 857. Does the holder of a check in a bill of exchange, for instance, have any sufficient rights against the drawee bank? A universal response will be positive. The holder may insist on payment by the bank if there are fund in reserve to cover the amount. An average lawyer who knows the provisions of the Uniform Negotiable Instruments Law will affirm that the holder has no rights against the bank. This paper uncovers the accuracy of these two schools of thoughts-the lawyer’s and the holder’s viewpoints.
Right of the Remitter of a Bill or Note, Moore, U. (1920). Right of the Remitter of a Bill or Note. Colum. L. Rev., 20, 749. It is a usual practice for business across North America, British Isles, Europe and some other parts of the World that follow European way of doing business to conduct transactions in which a negotiable bill of exchange, check or promissory notes are visible in such a manner that a third party(excluding payee and obligor) has the undertakings at his or her beck and call between the period of appending the signature of the maker, acceptor, acceptor or irregular indorser and the receipt by the recipient(payee) of the undertaking. This paper examines the remitter’s right of such bill or note.
Effect of Acceptance of an Altered Bill, Greeley, L. M. (1932). Effect of Acceptance of an Altered Bill. Ill. L. Rev., 27, 519. This paper understudies the effect of acceptance of an altered bill.
Profit and duty in the Second Bank of the United States’ exchange operations, Knodell, J. (2003). Profit and duty in the Second Bank of the United States’ exchange operations. Financial History Review, 10(1), 5-30. There was an imminent trade-off faced by the Second Bank of the United States(1816-36) between the expected revenue for shareholders and the free but expensive fiscal responsibilities to be provided for the Federal Government as mandated during the period of expanding westward and local transportation systems. This article opines that the large-scale dealings of the bank in local and foreign exchange overhauled this imminent trade-off into a beneficial relationship between the private and public obligations. The bank’s success was attributed to the discovery of the niche-the provision of payment services that are interregional and international in scope and operations.