The difference between domestic letter of credit and banker's acceptance

Different nature, different transfer methods, different handling fees charged by the bank, different legal basis, different impact on the statement of the enterprise, different settlement methods, different requirements and constraints, different flow methods, different risk factors for the bank, different business models.

1, the nature of the different: letter of credit is a conditional payment order (letter of credit need to match the documents before you can obtain payment), and bankers' acceptances are not conditional payment order (as long as there is a bill of exchange can be accepted).

2, the transfer mode is different: the costs associated with the letter of credit must be completed in the banking system, while the banker's acceptance can be carried out between enterprises.

3, the bank charges a different fee: according to the "payment and settlement methods", the bank acceptance invoicing fee of 0.05%, letter of credit opening fee of 0.15%, negotiation fee of 0.1%.

4, the legal basis is different: banker's acceptance based on the "Bills of Exchange Act"; and letters of credit based on the "domestic letter of credit settlement methods".

5, different impact on the statement of the enterprise: banker's acceptances are included in the balance sheet; letter of credit reaction in the off-balance-sheet business (extension of the application: can optimize the liability structure of the enterprise).

6, the settlement mode is different: the domestic letter of credit reflects the way of single money flow; bankers acceptances reflect the way of goods flow.

7, the requirements and constraints are different: although the application for banker's acceptance, the bank requires the applicant to provide the two sides of the transaction contract, but does not guarantee that the applicant in the banker's acceptance, the real use of this ticket to fulfill the contract; and many of the terms of the domestic letter of credit are based on the terms of the contract to repair (open), such as: the quality of goods, quantity, packaging, shipment period, etc. Requirements.

8, the flow of different ways: banker's acceptances issued by the drawer, the bank acceptance can be handed over to the acceptance of the applicant, by its free transfer; and the "domestic letter of credit settlement methods" stipulates in Article 2, the letter of credit is irrevocable, non-transferable documentary credits.

9. Different risk coefficients for banks: According to the Capital Management Measures for Commercial Banks issued by the CBIRC in 2013, when calculating the risk weight of a bank, bankers' acceptance is a "credit business equivalent to a loan", with a credit conversion factor of 100%; whereas a domestic letter of credit belongs to a category of "letters of credit directly related to trade". "short-term contingent items directly related to trade" with a credit conversion factor of 20%.

10, the business model is different: Bankers Acceptances, is generally not allowed to "self-opening self-posting", and the operation of the domestic letter of credit, has created a "self-opening self-consideration" business model (more conducive to corporate finance).