Bank Accepted Bills - FAQs

In their simplest definition, Bank Bills are a form of an IOU (similar to a cheque, which in itself is a bill of exchange) with the exception that Bank Bills have a specific date in the future when they are payable (i.e. Maturity date). Apart from having a specific maturity date, their make up is very similar to that of a cheque.

The Bank Bills that we sell are Bank Accepted Bills. These are Bank Bills that have been "accepted" (guaranteed) by an Australian bank. In accepting the Bank Bill, that bank undertakes to make payment at maturity.

We offer competitive rates of interest based on market rates. The actual rate of interest will depend on the term and the amount you have to invest. Interest is paid at maturity and represents the difference between the Face Value and the purchase price of the bill.

When you invest in a Bank Accepted Bill, you purchase the face (maturing) value at a discount. The full face value of the Bill is paid to you at maturity. The difference between the purchase price and the face value represents the interest earned and it this amount that should be declared for taxation purposes. The discount formula to convert from the face value of the Bill to the purchase price is complicated. The easiest way to explain is as follows:

Interest =  Purchase Price x Interest Rate x Days to Maturity
                                            100 x 365

Face Value = Purchase Price + Interest

It is easy to see that this is identical to working out simple interest on any deposit. The hard part is calculating it backwards from the face value to the purchase price. Bank of Melbourne will look after this aspect for you.

Quite simply anyone meeting our minimum investment criteria can invest in Bank Accepted Bills. This includes business customers, superannuation funds, companies and individuals alike.

We request an initial investment amount of $500,000. If you cannot meet this minimum, Bank of Melbourne has a range of deposit products that will meet your needs.

You are asked to take care when deciding the term of your investment. The interest rates prevailing at the time of request to redeem, and the term remaining to maturity, will determine the repurchase price of the Bank Bill. This rate may be different to the rate that the Bank Bill was originally purchased at, as the rates may have moved in the intervening period.

All investments must be returned to the investor in the form of a bank cheque made out in the name of the investor or as a direct credit to an account in the same name.

Yes, the normal identification arrangements apply. Obviously, if you are an existing customer, you have already been identified and no further action would be required.

Bank of Melbourne will hold the Bank Bill on a safe custody basis pending maturity or repurchase, and provide a letter confirming your purchase. This ensures that the Bank Bill does not get mislaid and that it is dealt with on the maturity date. Should you desire to take delivery of the Bank Bill and subsequently lose it, you have nothing to "cash in" or present at maturity. Holding the Bank Bill in safe custody ensures that this will not happen.

There are no charges applicable to Bank Accepted Bills.

Simply phone your Bank of Melbourne Financial Markets representative to discuss your needs.