Capital Purchase Program - CPP

AAA

DEFINITION of 'Capital Purchase Program - CPP'

A program sponsored by the U.S. Treasury designed to provide new capital to banks, which will in turn allow them to loan more money to businesses and thus stimulate the economy. Under this program, the U.S. Treasury will purchase up to $250 billion of senior preferred shares of qualifying U.S. banks and savings institutions. Subscribing banks must be willing to sell an amount of stock equal to 1-3% of their risk-weighted assets.

INVESTOPEDIA EXPLAINS 'Capital Purchase Program - CPP'

The Capital Purchase Program was offered to the financial community on October 14, 2008. In order to participate in the program, banks and savings institutions had to respond by November 14, 2008. The shares purchased by the Treasury are considered tier 1 capital. The shares will pay a dividend of 5% per year for the first five years and then reset to 9% per year thereafter.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Senior Issue

    An issue of bonds, preferred stock or other securities that represents ...
  3. Risk-Weighted Assets

    In terms of the minimum amount of capital that is required within ...
  4. Tier 1 Capital

    A term used to describe the capital adequacy of a bank. Tier ...
  5. Bailout

    A situation in which a business, individual or government offers ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. How can an investor determine a company's annual return from looking at its financial ...

    The funds in a share premium account cannot be used for a company's general expenses. These funds are restricted in terms ... Read Full Answer >>
  2. What is the difference between horizontal integration and vertical integration?

    Although holders of preference shares and bonds are both entitled to regular distribution payments, preference shares do ... Read Full Answer >>
  3. What are some advantages of ordinary shares?

    Ordinary, or common, shares have many benefits for both the investor and the issuing company. For individuals, investing ... Read Full Answer >>
  4. Can I receive dividends on ordinary shares of a company?

    Many companies pay dividends to common shareholders, providing one of the chief benefits of this type of investment. Whether ... Read Full Answer >>
  5. How can you calculate the difference between nominal value and real value of stock ...

    The nominal value, or book value, of a share is usually assigned when the stock is issued. Market value reflects what the ... Read Full Answer >>
  6. Under what circumstances is the nominal value out of line with the real value of ...

    The nominal value of stock shares is the actual face value when the shares are issued. This represents how much the stock ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Economics

    What Is The Balance Of Payments?

    The balance of payments helps countries to track how much money is coming in and how much money is going out. Learn more about BOPs here.
  3. Markets

    Understanding Small- And Big-Cap Stocks

    If you don't realize how big small-cap stocks can be, you'll miss some good investment opportunities.
  4. Insurance

    Market Capitalization Defined

    Find out the differences between mega-, large-, mid- and small-cap stocks and how each suits different investing styles.
  5. Bonds & Fixed Income

    Understanding Capital And Financial Accounts In The Balance Of Payments

    The current, capital and financial accounts compose a nation's balance of payments.
  6. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  7. Investing

    7 Investing Mistakes Warren Buffett Regrets

    Even the “Oracle of Omaha” has made a few money mistakes investing, from losing billions by passing on stock options to companies destined to fail.
  8. Mutual Funds & ETFs

    Top 4 High-Yielding Preferred Stock ETFs

    ETFs offer diversification, a clear advantage. Preferred stock ETFs offer even more.
  9. Investing Basics

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.
  10. Investing Basics

    What is Capital Stock?

    Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.

You May Also Like

Hot Definitions
  1. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  2. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  3. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  4. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  5. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
  6. Product Line

    A group of related products manufactured by a single company. For example, a cosmetic company's makeup product line might ...
Trading Center