Acceptor

What Is an Acceptor?

An acceptor is the person (or bank) who is expected to pay a check or draft when it is presented for payment.

Understanding an Acceptor

Depository institutions have capital requirements that regulatory agencies, such as the Bank for International Settlements, the Federal Deposit Insurance Corporation, or the Federal Reserve Board, have set in place. These capital requirements ensure that banks have enough capital to honor withdrawals if they sustain operating losses. Adhering to capital requirements ensures that a bank will be able to act as an acceptor and take responsibility for all the checks that customers present.

The 2008 global financial crisis precipitated the passing of the Dodd-Frank Act of 2010, which ensured that the largest U.S. banks would maintain enough capital to withstand systematic shocks without defaulting. If several major commercial banks were to default, it could be catastrophic, especially for retail customers and high net worth customers.

An acceptor may also be a party in a contractual agreement called an acceptance, used in international trade. In an acceptance, an importer agrees to pay the amount due for goods received at the maturity date. A document is drafted and the buyer of the goods or importer agrees to pay the draft and writes "accepted," or similar wording, indicating acceptance on the document. At that point, the buyer becomes the acceptor and is obligated to make the payment by the specified date in the future.

Example of an Acceptor

An example of an acceptor is a bank that accepts a check drawn against it and assumes responsibility for its payment. Suppose that Company XYZ has paid Electric Company ABC through a check drawn against Bank DEF. When Electric Company ABC presents the check for payment, and the bank agrees to pay the check, it becomes the acceptor.