Accepting House
Definition
Formerly, a mainly British institution specializing in accepting or guaranteeing bills of exchange.
A service fee was charged for guaranteeing payment, enabling the bill to be discounted at preferential rates on the money market. The 1990s saw a decline in the use of bills of exchange and most of the accepting houses were absorbed by the merchant banks.
Example
Example 1:
Similar to how some Nigerian merchant banks today guarantee trade finance instruments for a fee, British accepting houses played that same role historically, charging for their stamp of approval to make bills of exchange more credible in the money market.
Example 2:
In 1970s London, a textile importer used a reputable accepting house like Hambros Bank to guarantee his bill of exchange, giving it instant credibility on the money market and securing a discounted rate, until such institutions were eventually swallowed up by larger merchant banks.