Bankers' Acceptances (BAs)
Bankers' Acceptances are short-term promissory notes issued by corporations with the
unconditional guarantee of a major Canadian chartered bank, for
any investment amount. When issued directly by a financial institution
such as a chartered bank, they are known as Bearer Deposit Notes
(BDNs). They have the same high quality as the guaranteeing bank
and usually offer a slightly higher return than Government of
Canada T-Bills. Like all money market investments, they are fully
marketable and can be sold at market value at any time. They
are available for terms from one month to one year.
Common Characteristics
Dollars to Invest/Time Horizon
Minimum investment is (at face value) $5,000 for three months to one year, $25,000 for one or two months, available in Canadian and U.S. dollars. Terms vary from one month to one year.
Risk/Return
Direct obligation of the issuing corporation and fully guaranteed by the sponsoring Canadian Bank. Not CDIC insured. Higher yields than government-issued Money Market securities of similar term.
Liquidity
Highly liquid; may be sold at any time, with settlement within one business day.
Income
Earnings are distributed at maturity.
Key Benefits
- Unlimited issuer guarantee, regardless of the size of the investment.
- Fully guaranteed principal and return if held to maturity.
- Higher yielding than term deposits, GICs and government-issued Money Market securities.
- High degree of liquidity.
- RSP/RRIF eligible.
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