This report does not constitute a rating action.

The ABCP Market Has Evolved Into Two Distinct Products

In the wake of the global financial crisis, non-bank sponsors have re-engineered asset-backed commercial paper (ABCP) and driven its rise globally. The ABCP industry has undergone a transformation over the past two decades. Prior to 2007, the industry had several innovative structures that relied on "internal liquidity," which is the ABCP conduit's ability to repay all or a portion of the maturing commercial paper (CP) with either the cash flow generated by the underlying assets or the proceeds from the sale of the assets in the secondary market. These included structured investment vehicles (SIVs) and other market value programs that sponsors used to tap into short-term markets. After the global financial crisis, these riskier structures were completely phased out.

What remained were the conventional multiseller programs, where bank sponsors fund or warehouse assets (such as auto loans or trade receivables) in special-purpose entities known as ABCP conduits. In addition, the bank sponsors provide liquidity support to address the timing mismatch between the underlying assets and the ABCP. Multiseller programs are still the dominant type of ABCP.

However, with the implementation of new banking regulations such as Dodd Frank and standards such as the Basel framework, an alternative ABCP has emerged as banks sought to improve their regulatory capital ratios and balance sheet efficiency. This propelled non-bank sponsors into relevance in the U.S. and EMEA as global systemically important banks (G-SIBs) started looking to non-bank alternative ABCP programs as a cost-effective solution for achieving funding diversification and access relatively cheap, short-term funding (see chart 1). Alternative ABCP are bank-supported ABCP programs, but they differ in their nontraditional assets and agreements, which include treasuries, cash, derivatives, securities lending, and repurchase agreements. In the U.S., we also rate alternative ABCP programs sponsored by banks, which include cash-collateralized programs.

As of March 2025, the $333 billion in total U.S. ABCP outstanding comprised multiseller programs ($172 billion), alternative non-bank sponsored programs ($92 billion), and alternative bank sponsored programs ($67 billion). In EMEA, the $152 billion ABCP outstanding consists of multiseller programs ($86 billion) and alternative non-bank sponsored programs ($68 billion) (see chart 2).

Chart 1

S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and responses--specifically with regard to tariffs--and the potential effect on economies, supply chains, and credit conditions around the world. As a result, our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential shifts and reassess our guidance accordingly (see our research here: spglobal.com/ratings).

Chart 2

Non-Bank Sponsors Forge Their Own Path Globally

Non-bank sponsors rise to global prominence. Non-bank sponsored issuance has grown rapidly in the U.S. and Europe, driven by the G-SIBs' demand for regulatory capital, balance sheet efficiency and diversified short-term funding. As of March 2025, non-bank sponsors comprise four of the top 10 ABCP sponsors globally, reflecting their growing prominence (see chart 3). Of these four non-bank sponsors, Northcross Capital, Guggenheim Partners, and BSN Capital were funded prior to the global financial crisis, while Nearwater Capital, the largest non-bank sponsor, initiated funding in 2018.

Chart 3

Although ABCP issued by non-bank programs is fully supported, it deviates from multiseller programs in two important ways: the type of liquidity support and the underlying assets. In general, these programs are supported by hedges or a securities financing transaction (SFT) that is typically in the form of a repurchase agreement or a securities lending agreement, or a combination of both. The underlying assets generally consists of securities, such as U.S. treasuries or equities, or, to a lesser extent, securities, bonds, commercial loans, etc. The agreement and underlying asset supporting each program is driven primarily by the support counterparty and its needs.

Non-bank activity surges as the banking regulatory landscape changes. In the wake of the global financial crisis, banking regulation underwent a fundamental transformation aimed at restoring financial stability and preventing future systemic failures. Regulators around the world implemented stricter capital and liquidity requirements, most notably through the Basel III framework, which raised the quality and quantity of capital banks must hold and introduced measures such as the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). Enhanced supervisory oversight, stress testing, and resolution planning also became central components of regulatory regimes, particularly for G-SIBs.

Chart 4 provides a historical breakdown of non-bank sponsored ABCP outstanding.

Chart 4

Non-bank sponsored ABCPs provide capital solutions to the G-SIBs in this evolving regulatory landscape. For example, if a bank needs high quality liquid assets (HQLAs) to improve its liquidity coverage ratio, it may enter into a reverse repurchase agreement with an ABCP conduit. The ABCP conduit would use the proceeds to acquire HQLAs and sell them to the bank. The bank would agree to resell the HQLAs to the conduit at the legal final maturity date, which typically matches the ABCP's tenor. Market value risk associated with HQLAs is mitigated via a hedge with another bank. The second bank gains the exposure to the HQLA, which offsets short positions it maintains across its investment portfolio with other market participants.

HQLA demand drives U.S. ABCP financed treasury trades, and EMEA banks are some of largest counterparties in non-bank programs. In the US, treasury trades through hedges or SFTs represent $45 billion in invested amount in ABCP programs as of March 2025, including the hedge and SFT in two-leg ABCP structures (see chart 5). However, European banks are the most active counterparties in non-bank programs (see chart 6). This is partly due to the fragmentation of the European market relative to the U.S., which leads to more willingness to pursue these types of financing structures. Further, following the global financial crisis and banking regulatory overhaul of Dodd Frank, some global U.S. banks closed their conduit business and are still hesitant to utilize even alternative ABCP financing.

Chart 5

Chart 6

EMEA Programs Rely Heavily On U.S. Market Demand

European non-bank sponsors have setup co-issuers in the U.S to tap into market demand abroad. As the non-bank alternative market rapidly expanded in Europe, sponsors have developed co-issuer structures with two issuers--one domiciled in Europe and another in the U.S.--to expand their investor base. As of March 2025, 92% of non-bank alternative ABCP outstanding was denominated in U.S. dollar, reflecting the significance of U.S. market demand for these programs (see chart 7). This strategic move leverages the prime money market fund and local government investment pool industries, which represent a significant portion of the U.S. investor base.

Chart 7

Multiseller Conduit Activity Declines Globally But Remains Elevated

Global ABCP multiseller programs decline as economic uncertainty weighs on multiseller activity. Global multiseller conduit issuance declined to approximately $258 billion in outstandings as of March 2025 from 2023 levels, though they remain above 2022 levels. In response to rising interest rates in 2022 and 2023, ABCP multiseller conduit issuance increased, reaching approximately $271 billion outstandings globally in December 2023--the highest level in over a decade. However, economic uncertainty due in part to evolving tariff policy has driven multiseller conduit activity down. This declining trend is consistent across the largest multiseller sponsors (see chart 8).

Chart 8

U.S. And EMEA Multiseller Program Asset Composition Remains Consistent

Auto facilities are the largest asset type in U.S. multiseller conduits. Auto has historically remained the largest asset type (see chart 9) due to several interrelated factors, including consistent loan terms, predictable cash flows, and low prepayment risk. In addition, auto originators generate large volumes of homogeneous assets and often have repeat issuance, influencing their overall presence in multiseller conduits as an alternative funding source.

Chart 9

Trade receivables dominate in EMEA conduits. In EMEA, the main type of asset financed through traditional multiseller programs is trade receivables, which account for 54% of total assets as of March 2025. This share has been stable over time, with roughly half of assets being trade receivables in the last decade. Trade receivables are well suited for ABCP conduits due to their short-term duration, which typically range from 30 days to 90 days and don't exceed one year, as well as their constant renewal.

Chart 10

Partially Support U.S. ABCP Asset Performance Remains Extremely Robust

Prime auto loans comprise one-third of partially supported assets. The top three assets in this segment (which is limited to conduits sponsored by JPMorgan Chase Bank, Citibank, and Royal Bank of Canada) are partially supported autos ($20.2 billion), student loans ($6.6 billion), and consumer-other receivables ($4.2 billion), which combined comprise 10% ($31 billion) of total net investment (see chart 11).

Chart 11

Our surveillance of these facilities includes a monthly review of credit enhancement to short tail losses. Table 1 reflects the weighted average ratios across asset type. However, despite the somewhat weaker outlook performance for some sectors (see table 2), we believe it is highly unlikely that credit enhancement levels could erode such that partially supported ABCP investors are exposed to losses.

Table 1

Partially-support asset performance
	February 2024	February 2025
Autos	186.24	251.15
Student loans	57.06	50.05
Equipment	166.00	92.51
Dealer floorplan*	0.00	0.00
Credit cards	20.31	23.86
Consumer- other	267.65	52.01
Trade receivables	33.07	102.68
Commercial-other*	306.47	580.00
*Dealer floorplan has net losses of $0. §Commercial-other includes commercial fleet leases, insurance premium, manufactured housing, and chattel mortgage. Source: S&P Global Ratings.

In March 2025, U.S. auto loan ABS performance showed improvement month over month across the prime and subprime segments. Prime auto loan recoveries and delinquencies improved for the third consecutive month, while annualized losses remained relatively flat. Subprime annualized losses decreased month over month due to higher recoveries but remained higher year over year (see “U.S. Auto Loan ABS Tracker: March 2025 Performance,” published May 6, 2025).

Table 2

12-month North America structured finance outlook - Q2 2025
	Collateral performance outlook	Ratings trends
ABCP	Stable	Stable
ABS - Prime auto loans ABS	Somewhat weaker	Stable
ABS - Subprime auto loans	Somewhat weaker	Stable
ABS - Auto lease	Stable	Stable
ABS - Auto dealer floorplan	Stable	Stable
ABS - Credit cards	Somewhat weaker	Stable
ABS - Unsecured consumer loans	Somewhat weaker	Stable
ABS - FFELP student loan	Somewhat weaker	Stable
ABS - Private student loan	Somewhat weaker	Stable
ABS - Commercial equipment	Stable	Stable
ABCP--Asset-backed commercial paper. ABS--Asset-backed securities. Source: S&P Global Ratings.

Credit Conditions Remain Uncertain As Tariff Policy Evolves

We recently revised our GDP growth forecasts closer to our previous March 27, 2025, numbers following the reduction in the U.S. and China bilateral tariffs on May 12, 2025, and 90-day pause. However, U.S. imports still face tariffs that are six times higher than 2024 levels, and where the tariff level settles after the 90-day pause remains uncertain (see “Global Credit Conditions Special Update: U.S.-China Tariff De-Escalation Brings Some Temporary Relief,” published May 15, 2025).

Despite this uncertainty, we expect the global ABCP market to remain stable over the near-term, partly driven by the underlying strength of the supporting financial institution industry in North America and Europe. As of March 2025, 90% of banks in North America had stable outlooks, while 79% of banks in Europe had stable outlooks and 15% had positive outlooks.

The path ahead for U.S. banking regulation remains highly uncertain. Although we don't expect significant rollbacks under the Trump administration, newly appointed leadership has suggested changes to several regulatory and supervisory areas. How changes to bank regulation and supervision ultimately affect our ratings will depend on their magnitude, details, and our view of whether they balance efficiency and effectiveness versus simply easier oversight. It will also depend on how banks respond to the changes--perhaps with greater risk taking or weaker financial management (see “Credit FAQ: What Regulatory And Supervisory Reform Could Mean For U.S. Bank Ratings,” May 22, 2025.

At the same time, European banks are pushing for regulatory simplification, especially banks operating in multiple jurisdictions. As regulatory changes are rolled out, we expect ABCP could be affected. But this will depend on the nature of the policy shifts.

Appendix

Download Appendix tables here: Appendices

Editor: Georgia Jones

Related Criteria

• Global Asset-Backed Commercial Paper Methodology And Assumptions, March 22, 2024

Related Research

• U.S. Auto Loan ABS Tracker: March 2025 Performance, May 6, 2025
• Credit FAQ: What Regulatory And Supervisory Reform Could Mean For U.S. Bank Ratings, May 22, 2025.
• Global Credit Conditions Special Update: U.S.-China Tariff De-Escalation Brings Some Temporary Relief, May 15, 2025
• Credit Conditions North America Q2 2025 – Uncertainty Prevails, March 26, 2025
• Credit Conditions Europe Q2 2025 – Europe Plots A New Course, March 26, 2025

Primary Contact:	Joshua C Saunders, Chicago 1-312-233-7059; joshua.saunders@spglobal.com
Secondary Contacts:	Radhika Kalra, Austin 1-212-438-2143; radhika.kalra@spglobal.com
	Florent Stiel, Paris 33-14-420-6690; florent.stiel@spglobal.com
	Sandra Fronteau, Paris 33-1-44-20-6716; Sandra.Fronteau@spglobal.com