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ARTICLE · 04 JULY 2024

FSB Raises Concerns With CP And CD Markets

Mayer Brown
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On May 22, 2024, the Financial Stability Board (FSB) issued a report on vulnerabilities in the markets for commercial paper (CP) and negotiable certificates of deposit (CDs).

United StatesFinance and Banking
Matthew Bisanz
Matthew Bisanz
Bradley Berman
Bradley Berman
Jerry R. Marlatt
Jerry R. Marlatt
Anna T. Pinedo
Anna T. Pinedo
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On May 22, 2024, the Financial Stability Board (FSB) issued a report on vulnerabilities in the markets for commercial paper (CP) and negotiable certificates of deposit (CDs). The report analyzes the structure of the markets, identifies vulnerabilities, and suggests reforms that policy makers might consider. It acknowledges that limitations exist, and, therefore, the adoption of the reforms will vary by industry as well as by regional and national authorities. In this Legal Update, we discuss potential market reforms and considerations.

BACKGROUND

CP is a short-term unsecured debt instrument issued by a corporation to finance its working capital needs. A CD is a time deposit obligation that is issued by a bank. CP generally is, and CDs can be, negotiable, which allows them to be readily transferred and traded in the secondary market. This gives issuers access to short- to medium-term funding that is usually low-cost.

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