Le Lézard
Classified in: Science and technology, Business
Subjects: PDT, LEG

AFP Urges Fed to Include Tier 2 Commercial Paper in New Facilities


BETHESDA, Md., March 24, 2020 /PRNewswire/ -- The Association for Financial Professionals (AFP) is requesting that the Federal Reserve consider expanding new facilities intended to support commercial paper (CP) and money market funds (MMFs) to include Tier 2 CP issuers.

AFP sent letters to the Fed and the Department of the Treasury, voicing its support for the establishment of the Commercial Paper Funding Facility (CPFF) and the Money Market Mutual Fund Liquidity Facility (MMLF). However, AFP also requested that the CPFF be extended to Tier 2 CP issuers, and that the MMLF include Tier 2 CP as eligible collateral.    

The Tier 2 CP market is approximately $90 billion in size and includes many public utilities and other critical industries. Extending the CPFF and MMLF to Tier 2 companies would not increase risk to the Federal Reserve by any measurable degree, as the historical default rate on 180-day P-2 paper is 0.027%, as compared to 0.018% for P-1 paper. 

At present, the Tier 2 CP market is largely frozen, with rates at two to three times their historical average. As a result, high-quality issuers will draw on their credit lines as an alternative source of liquidity, putting increased pressure on banks to find funding. By expanding the CPFF, the demand for bank credit on the part of Tier 2 issuers should decrease. Similarly, expanding the eligible collateral under the MMLF to include Tier 2 CP will help to restore demand and normalize rates on this high-quality paper.

"While some may be dismissive of the impact of higher funding rates on large corporations, it is important to understand the broader impact," said Jim Kaitz, president and chief executive officer of AFP. "Higher funding costs may lead to headcount reductions, and delays or reductions in capital expenditures. Additionally, there will likely be negative impacts felt by businesses that supply Tier 2 CP issuers, as well as consumers."

ABOUT AFP
Headquartered outside of Washington, D.C. and located regionally in Singapore, the Association for Financial Professionals (AFP) is the professional society committed to advancing the success of treasury and finance members and their organizations.  AFP established and administers the Certified Treasury Professional and Certified Corporate FP&A professional credentials, which set the standards of excellence in treasury and finance.  Each year, AFP hosts the largest networking conference worldwide for more than 7,000 corporate financial professionals.

For press queries, please contact Melissa Rawak at [email protected].

SOURCE Association for Financial Professionals (AFP)


These press releases may also interest you

at 11:25
Manifest Technologies, Inc., developer of an AI-powered computational neuro-imaging platform for CNS disease, today unveiled the company after completing its initial funding and partnership with a top five global pharmaceutical company. Today, over...

at 11:18
Bloxcross, a premier payment solutions provider, and GoDirectPay, an e-payment expert, have collaborated to launch a groundbreaking mobile application that revolutionizes global payments. https://directpay.blox.global/register/ This custom-built app...

at 11:14
Vandis, Inc, today announced that it has become an Expert-level partner within Fortinet's Engage Partner Program. This achievement demonstrates Vandis' ongoing efforts to improve end user networks by expanding product knowledge in one of the...

at 11:14
Stream.Security, a leading platform for cloud solutions specializing in real-time digital twin technology, announced today the release of new advanced threat investigation and AI-powered remediation capabilities. The new real-time attack path...

at 11:08
"Operation Medic Bag" is a focused effort to respond to community expectations and improve PAYDAY 3. The initiative covers a range of sought-after features and improvements to gameplay, stability, matchmaking, content and enhanced features. The...

at 11:08
Sunwave Health, a leader in healthcare technology, proudly announces the launch of MARA, a patent-pending, innovative AI Agent designed to transform the landscape of behavioral health documentation. Since its launch on October 25, 2023, MARA has...



News published on and distributed by: