Euro Commercial Paper

Posted in Finance, Accounting and Economics Terms, Total Reads: 759
Advertisements

Definition: Euro Commercial Paper

Euro Commercial Paper is an unsecured, short term, non underwritten loan, issued by a bank or a commercial organization in the international money markets, denominated in a currency different form the home currency of the bank or the organization. It differs from a commercial paper in the sense that an ECP is denominated in a foreign currency and is dealt in international markets, whereas a commercial paper is dealt within the home boundaries in the domestic currency.


Euro Commercial Paper is generally in the form of a promissory note, and is issued on a discount or on an interest bearing basis. The time period of maturity of the Euro Commercial paper ranges from a few days to one year, the most common maturity time period being 182 days. The minimum amount to be invested in Euro Commercial Paper is $500,000.


ECP is very advantageous as it provides a flexible alternative to short term finance and there is no collateral required and the interest rate charged is set at a very small margin, above than the market, for prime issuers. It can also be traded in a secondary market, which is not allowed in the case of US commercial paper.


Example: If a French corporation has issued short term bonds in the international money markets (denominated in Canadian dollars), to finance its business requirements, then that organization has issued Euro commercial paper.

 

Search & Explore : Management Dictionary

Browse the definition and meaning of more terms similar to Euro Commercial Paper. The Management Dictionary covers over 7000 business concepts from 6 categories.

Advertisements



Share this Page on:

Similar Definitions from same Category: