Question

1. Banker’s Acceptances

   1. Describe how foreign trade would be affected if banks did not provide trade-related services.

   2. How can a banker’s acceptance be beneficial to an exporter, an importer, and a bank?

Answer 1

a). If the banks did not provide the trade related services, it will result in the decline of the foreign trade. It is because many of trades are proceeded only when the banks back the transaction with the acceptances held by the banker.

b). Inorder to get an additional security, a type of draft that an individual or business can request from the bank is usually known as banker's acceptance.

A banker's acceptance provides a certain assurance to the exporters thus he cannot be worried about the importer's risk in the term of credit.

In the case of importers, the banker's acceptance provides them the freedom to import the commodities without any credit issues.

In the case of bank, the banker's acceptance provides the source of revenue for the banks. It is because, banks charge a certain a kind of fee or charge inorder to do these services.

Thanks!..