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Determinants of syndicated lending in European banks and the impact of the financial crisis

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  • Howcroft, Barry
  • Kara, Alper
  • Marques-Ibanez, David

Abstract

Syndicated lending is a widely practiced alternative to traditional bilateral lending and within Europe the syndicated loan market increased significantly during the 2000s. Using a dataset consisting of 4166 European banks, the authors examine the factors that determine the bank's willingness to use syndicated lending rather than traditional lending during the period 2000–2010. The paper finds that syndicated lending was an alternative to bilateral loans when banks were targeting growth or looking to utilize potential capital surpluses. Syndicated lending was also used to improve the returns and credit quality of the bank's loan portfolios. However, in the post crisis period, European banks are less interested in syndicated loan markets and larger banks, especially, those with strong capital bases, are refraining from syndicated lending.

Suggested Citation

  • Howcroft, Barry & Kara, Alper & Marques-Ibanez, David, 2014. "Determinants of syndicated lending in European banks and the impact of the financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 473-490.
    • Handle: RePEc:eee:intfin:v:32:y:2014:i:c:p:473-490
    DOI: 10.1016/j.intfin.2014.07.005
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    4. Burietz, A. & Ureche-Rangau, L., 2020. "Better the devil you know: Home and sectoral biases in bank lending," International Economics, Elsevier, vol. 164(C), pages 69-85.
    5. Hasan, Iftekhar & Kim, Suk-Joong & Politsidis, Panagiotis N. & Wu, Eliza, 2021. "Loan syndication under Basel II: How do firm credit ratings affect the cost of credit?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    6. David Makanile & Pastory Dickson, 2022. "Determinants of lending behaviour of commercial banks in Tanzania," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(2), pages 260-269, March.
    7. Drago, Danilo & Gallo, Raffaele, 2018. "Do multiple credit ratings affect syndicated loan spreads?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 1-16.

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    More about this item

    Keywords

    Syndicated loans; Bilateral lending; Financial crisis;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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