Bank Acceptances Used Most Extensively

The commonest forms of bills in England are those known as "Bankers' Acceptances." It maybe said, by way of definition, that they are bills drawn by sellers of merchandise on bankers, the latter accepting the bills as agents of the buyers. This is the usual manner in which English banks assist in the financing of trade and commerce. They are similar to the American Bankers' Acceptances arising in the same manner. The "bank acceptance" is based generally upon an agreement, whereby the firm, in this instance the buyer, is required to furnish the bank with funds before maturity. The bank here does not lend its money, but rather its credit, and is provided with funds beforehand with which to meet the acceptance upon presentation for payment. The bank accepting the draft acts as agent for the buyer, and takes control of the goods, turning them over to the latter against a "letter of trust." The acceptor, on the other hand, gains a very great advantage in this way.

An acceptance by a high-class English bank is sure to find a ready market and will sell at a much higher rate of exchange than drafts drawn in any other currency. By reason of the extensive use of the acceptance in England, a market for this class of paper exists at all times, which directly benefits alike the manufacturer, the merchant, the trader, the banker, the investor, and generally, the commercial public.

Trade Acceptances A Very Important Form Of Commercial Credit

"Trade acceptances," or drafts drawn by a seller of goods and accepted by the buyer also comprise an important class of credit instruments eligible for rediscount with the Bank of England. Paper of this class bears in all cases a minimum of two names. Single name paper, which is the kind used in the United States generally, is in the credit systems of Europe, hardly recognized.

The English banks, discount and financial houses, are quick to take up commercial paper of this class for discount and investment purposes, knowing that they have at all times a ready market for their disposition if they should happen to be in need of funds. The great advantage, however, lies in the fact that by their use, billions of dollars, otherwise tied up and awaiting settlement in the form of time accounts, are released to the benefit of the merchant and the manufacturer, and the burden of financing the country's trade and commerce is thereby shifted to the banker, where it properly belongs. This can best be accomplished by the maintenance of a broad discount market, such as exists in England-a discount market which is capable of collecting and controlling the resources and funds of the nation and making them available at all times where they are most needed.