CP meaning in Banking ?
Answer: What is Commercial Paper mean?
Commercial paper, in the global financial market, is an unsecured promissory note with a fixed maturity of rarely more than 270 days. In layperson terms, it is like an "IOU" (I owe you) but can be bought and sold because its buyers and sellers have some degree of confidence that it can be successfully redeemed later for cash, based on their assessment of the creditworthiness of the issuing company.
Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations (for example, payroll) and is backed only by an issuing bank or company promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized credit rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value and generally carries lower interest repayment rates than bonds due to the shorter maturities of commercial paper. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution pays. Interest rates fluctuate with market conditions but are typically lower than banks' rates.
Commercial paper—though a short-term obligation—is issued as part of a continuous rolling program, which is either a number of years long (as in Europe) or open-ended (as in the US).
reference
Comments(0)
Ever curious about what that abbreviation stands for? fullforms has got them all listed out for you to explore. Simply,Choose a subject/topic and get started on a self-paced learning journey in a world of fullforms.