An abbreviation for asset-backed commercial paper; a short-term instrument that is backed by the cash flows from specific assets (e.g. mortgages, car loans, or commercial bank loans). More specifically, it is a commercial paper used by banks to finance trade receivables and other types of operating assets. Banks introduced asset-backed commercial papers (ABCP) to remove their current asset credits from their balance sheets and provide financing to their clients.

For example, a bank may set up a special purpose vehicle (SPV) (or generally an ABCP conduit) that issues commercial paper supported by the receivables of a client (it actually buys the receivables and issues paper thereon). The resulting credit asset (the loan) is thus moved off the bank’s balance sheet. That done, the bank is said to have managed to release the regulatory capital that is locked in the credit asset.