CP is issued as a series of notes, and each note promises to pay the bearer a stated sum of money at the maturity date. Each note shows:. Each note will also indicate that the note is negotiable, its bearer is entitled to payment, and the payment will be made on presentation of the note at maturity through a recognised bank by the issue agent on behalf of the company.
An issuing or paying agent handles the administrative processes. An investment bank will help arrange the issuance of CP by its large corporate clients, and provide them an immediate market by undertaking to bid for the paper and on-trade it to the investor market. A CP trader at a bank hopes to make a small margin of profit on huge volume turnover. This margin might be small as 2 basis points, i. The investor in CP is buying the unsecured debt of the corporate issuer, but in buying through a bank dealer the investor is also getting a moral obligation from the bank dealer to buy it back again, at the prevailing market price, if the investor wishes to return to cash.
This obligation is not enforceable. Like CDs, commercial paper CP originated in the US market and its creation and volume growth is very much a product of the banking environment there. The Us banking industry is still very fragmented, despite some mergers and takeovers. About 10 or 15 years ago it was even more so, with a large number of local banks.
In such an environment, it was often the case that major trading and manufacturing companies were a better credit risk than the banks. These institutions needed a channel through which money could be directed from cash-rich companies that needed short term financing. The invention of commercial paper provided such a channel avoiding the need of banks to intermediate through the loans and deposits market. In the US CP market, commercial paper is limited to a days tenor, with 14 days being the most common maturity. CP is negotiable and is in bearer form. Settlement takes place on the same day.
All issues must carry a credit rating. Only US dollar issues are possible.
The customer only needs to register at traders association. Additionally, the product is featured by simple information disclosure, high registration efficiency, convenient issuance formalities and flexible use of funds. ICBC Advantages 1. Rich underwriting experience: ICBC has a professional underwriting service team and abundant bond underwriting experience. It has established sound and effective internal operating mechanism in respect of customer service, examination and assessment of credit risk, and execution of underwriting transactions.
Smooth communication and cooperation: ICBC has established and maintained sound communication and coordination with the regulators as well as favorable business cooperation with investors, and is able to ensure smooth issuance of the related products. Service Channel and Time The customer may directly contact the Bank for handling this business during office hours based on its financing needs. Sign-up 1. Project examination: the customer shall submit the application materials to the Bank based on requirements of the regulatory departments, so that the Bank could carry out the due diligence investigation and credit risk examination on the customer.
Registration and declaration: the Bank will present the project registration and declaration materials to the traders association for consideration. Product issuance: after the project is reviewed and adopted by traders association, the latter will issue a registration notification. During , ICBC has been ranked the top among the Chinese bond lead underwriters by the size of bond lead underwriting business for six consecutive years , and ICBC has successfully issued more than RMB billion worth of ultra-short-term financing bonds for a number of enterprises.
Note: Information herein is for reference only. Please refer to announcements and regulations of local branches of ICBC for further details. ICBC retains the ultimate interpretation rights. Underwriting of Super Short-term Commercial Papers. Corporate Deposit. Current Deposit. Time Deposit. Foreign Exchange Deposit. Corporate Agreement Deposit. Structured Deposits. Corporate Call Deposit.
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Introduction to Commercial Paper (CP)
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