When making a recommendation of corporate commercial paper to a customer, credit risk is the most important consideration.
Credit risk is the probability of suffering losses as a result of a customer's loan failure or breach of contract. The simplest straightforward way to describe credit risk is as the possibility that a counterparty or bank borrower won't fulfil their commitments under the conditions that have been agreed upon.
By keeping credit risk exposure within acceptable bounds, credit risk management aims to maximise a bank's risk-adjusted rate of return. Commercial Paper (CP) is a type of promissory note that is an unsecured money market instrument.
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