Methods for Failure Detection

There are different forms of cheques. Some of these include: Certified Cheque, CashieU¶s Cheques, TelleU¶s Cheques, TraveleU¶s Cheque and Euro-Cheques.

Certified Cheque

Certification of Cheque indicates that: the Cheque is drawn on sufficient funds in the hands of the drawee bank; these funds have been set aside for the satisfaction of the Cheque; and that the funds will be paid to a holder entitled to the funds when the Cheque is presented for payment since certification constitutes an acceptance by the drawee bank.

Because the customeU¶s account is charged for the amount of the Cheque when it is certified, the bank is obliged to make proper payment even when it is presented for payment more than six months after its date.

This differs from the general rule governing ordinary Cheques whereby the drawee bank is under no obligation to pay a Cheque that is considered ³sWDOH´ (that is, one that is presented for payment more than six months after its date).

Cashier¶s Cheques

CashieU¶s Cheques are one of the most frequently encountered forms of

bank cheque. A cashieU¶s cheque is a draft or bill of exchange that is drawn by the bank on itself and that is issued by an authorized officer or

employee of the institution. Thus, a cashieU¶s cheque differs significantly from an ordinary cheque drawn by a customer on an account, as well as from an ordinary bank or bankeU¶s cheque. The bankeU¶s cheque is a draft drawn by one bank upon another bank. For this reason, the bankeU¶s cheque is subject to the general rules governing ordinary cheques including those permitting stop-payment orders. When the bank issues a cashieU¶s cheque, a direct payment obligating is created.

Furthermore, this obligation is said to be accepted by the mere issuance of the cashieU¶s cheque. The bank has an independent and direct obligation to the holder to honour the instrument.

Teller¶s Cheques

Instruments drawn by savings banks and savings and loan association and commercial banks are known as telleU¶s cheque. In effect, the institution draws a cheque on its account held at a commercial bank.

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Such a cheque is not issued by the commercial bank as in the case of a cashieU¶s cheque. For this reason, the act of issuing such a cheque does not in itself constitute acceptance of a primary payment obligation.

Although courts are in disagreement on this point, several instances have occurred where a stop payment order was effectively placed by the drawer institution, making such a cheque resemble a personal cheque rather than bank cheque in this regard.

Traveler¶s Cheque

TraveleU¶s cheques are instruments having the features of a cash substitute, which offers the security of a cashieU¶s cheque. In fact, when issued by a bank, traveleU¶s cheques are essentially equivalent to cashieU¶s cheques once a proper endorsement in the form of a countersignature is placed upon the instrument. The cheque form typically provides a space for the signature of the purchaser, which is used for comparison with the countersignature at the time payment.

Thus, the countersignature requirement provides security against loss or theft subsequent to the purchase of the instrument since the cheque is properly payable only if a valid countersignature is placed on the instrument at the time of payment.

Euro-Cheques

The Euro-Cheques is a blank cheque issued in a uniform format and color by any of the member banks of the European countries that formed the Euro-cheque system. Despite their official appearance, the Euro- cheque is like an ordinary cheque even when cashed with what is called the Euro-cheque Guarantee Card. The Euro-cheque guarantee of payment extends only to European countries and to some North African countries bordering on the Mediterranean Sea. Therefore, a Euro-cheque should be treated like an ordinary cheque since the guarantee does not extend to all parts of the world.

SELF ASSESSMENT EXERCISES

i. Define Bankers¶ Acceptances and State the various types of acceptances.

ii. Enumerate the key players in the acceptance market.

4.0 CONCLUSION

You have learnt in this unit that the wide spread use of the bankers¶

acceptances as means of providing credit shows that it represent an important financing instrument. In terms of collections, it has been learn that bank occupy an important role in the orderly collection of

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international payment obligations. They greatly facilitate transactions covering great distance by providing measure of security over documents and goods. They have also understood the major features that differentiate several types of Cheques and money order used to effectuate domestic and foreign payments.

5.0 SUMMARY

Bankers¶ acceptances represent the bill of exchange which is a written instruction sent by an exporter to an importer ordering the importer to pay to the exporter, or anyone specified by the exporter, a certain sum of money either on receipt of the bill, or at a specified date in the future.

Bankers¶ acceptances may be trade related or non-trade related. The collections method of payment minimizes the bank¶s responsibilities concerning payment when laid down procedures are followed. The collection uniform rule provide for liabilities and responsibilities off parties, payment, protest and advice of fate. Cheques are also used in making international payments. Different types of Cheques available include; certified, cashier, tellers, and traveleU¶s Cheques amongst others.

6.0 TUTOR MARKED ASSIGNMENT

Differentiate between traveleU¶s and TelleU¶s Cheques ANSWER TO SELF ASSESSMENT EXERCISES

i. Bankers¶ acceptances can be defined as a bill of exchange drawn on a bank by a party and accepted by that bank to pay a third party a certain sum at a specific future date. Bankers¶ acceptances may be classified into two namely; trade acceptances and non- trade acceptances.

ii. The bankers¶ acceptances investors include; local, state and federal governments, government agencies, savings institutions, foreign banks, industrial and insurance companies, investment funds and individuals.

7.0 REFERENCES/FURTHER READINGS

Deak, N.L. and Celusak J.C (1984); International Banking, New York:

Prentice-Hall, Inc.

Peter, O. (1979); International Banking, Washington D.C.: American Bankers Associations.

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MODULE 2

Unit 1 Foreign Exchange Market Unit 2 Foreign Rate of Exchange Unit 3 Foreign Exchange Control Unit 4 Euro Dollar Market

Unit 5 Swiss Banking

UNIT 1 FOREIGN EXCHANGE MARKET