Information > Financial Terms > This page

Hypothecation Certificate
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

A certificate attached to a bill of exchange drawn against a shipment of goods, which describes the nature of the shipment and authorizes the banker buying the bill to dispose of the goods in case payment or acceptance of the bill is refused.  The hypothecation certificate, also known as a letter of hypothecation, is given by the seller of the bill together with the bill of lading, insurance certificate, and other documents, as further security to the buying bank.

Habitual drawers of bills of exchange sometimes execute a general hypothecation power which is applicable to all the bills which they may sell to their bankers.  This is held by the purchasing bank.


Back to Information