Equity Commitment Note - ECN

DEFINITION of 'Equity Commitment Note - ECN'

A type of mandatory convertible bond issued by a bank or other lending institution that qualifies as regulated capital. An equity commitment note is redeemed when the sale or issue of securities is made at a future date by the issuing bank or lending institution. The Federal Reserve sets a maximum maturity of 12 years and requires that the issuing company fund one-third of the equity every four years.

BREAKING DOWN 'Equity Commitment Note - ECN'

Holding an equity commitment note is different than holding an equity contract note in that an investor is not required to purchase securities. The note is instead redeemed at a later time through the sale of either common or preferred stock.