What is a Bank Endorsement?

A bank endorsement is a bank’s authorization on a negotiable instrument. The instrument is generally created by the bank’s customer and is payable to the holder. This endorsement stipulates that the bank will stand by the obligations of the negotiable instrument as created. If the maker of the instrument does not pay the not when appropriately presented, the bank will pay the not. Examples of negotiable instruments covered by bank endorsement include check, banknotes (dollar bills or pound notes), promissory notes, demand drafts, certificates of deposits and bills of exchange.

Bank endorsements are commonly used in international trade where a party authorizes payment to another party that is unknown. There are two types of bank endorsements, they are banker’s acceptance and time draft.