A striking characteristic of the English and other European banking systems is the wide use of bank acceptances. In the United States the usual form of credit is the direct promissory note of the borrower for the term of the loan, but in European countries the bill of exchange is the common instrument of credit. A bill of exchange is an order drawn by the seller of goods, A, upon the buyer, B, asking B to pay at sight or at a given time to C a certain amount of money. B accepts the bill by writing across its face the word "Accepted," with his signature and the date, and so becomes responsible for its payment. This original form of accepted bill of exchange has been extended in recent years until credit can be raised against any form of collateral or security, even the mere personal credit of the parties named on it. Bills accepted by prominent business houses are readily negotiable and are ideal investments for bankers and others who have to keep their assets liquid.

A later development of the bill of exchange, originally drawn against merchandise actually shipped, is the " finance bill" drawn in anticipation of goods to be shipped, or against securities, or the personal credit of the parties to it. Great importance attaches, of course, to the name and standing of the acceptor. Gradually there developed in England a class of bankers, known as merchant bankers or accepting houses, who went into the business of accepting bills, for a commission, for others whose credit was not so well-established, thus making them readily negotiable.

The banks themselves have in recent years gone into the business of accepting bills of exchange, known as "bankers' bills," and these form a considerable part of the assets of European banks in their item of loans. A borrower needing a loan for sixty or ninety days may draw a bill upon his bank, which accepts it, thus making it immediately salable because of the bank's credit and standing. The general use of bills of exchange and bank acceptances has created a wide discount market in all the principal centers of Europe. These hank acceptances can be readily rediscounted at any time wherever the accepting bank is known.

Withers and Palgrave: The English Banking System, p. 36.