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A synthetic debt instrument created when a bank sells a share in a loan with a life under one year to a non-bank investor. Sale of the loan participation reduces the assets the bank carries and provides attractively priced financing to a borrower too small to have its own commercial paper program. The loan participation also provides a slightly higher yield, administrative simplicity, and diversification to a buyer of short-term debt instruments. Asset-Backed Commercial Paper often accomplishes some of the same objectives. Also called Participation Agreement. See also Disintermediation, Intermediation, Asset- Backed Commercial Paper (ABCP).
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