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Banks’ and Financial Institutions’ Decision to Participate in Loan Syndications

In: Syndicated Loans

Author

Listed:
  • Yener Altunbaş

    (University of Wales)

  • Blaise Gadanecz

    (Bank for international Settlements)

  • Alper Kara

    (University of Leicester)

Abstract

This chapter sheds light on the supply-side determinants of syndicated loan markets, by presenting evidence on the rationale behind the decision of banks to participate in loan syndications. First, the features of loan syndications that attract banks towards this market are discussed. Secondly, the chapter investigates the impact of banks’ structural characteristics on the decision to participate in loan syndications. For this purpose, a study undertaken by Altunbaş, Gadanecz and Kara (2005), which specifically focuses on the factors as to why banks engage or do not engage in syndicated lending, stands as a focal part of the chapter. Poorly performing banks — which have lower capital adequacy ratios, lower net interest margins and lower returns on equity and higher cost/income ratios — are found to be more involved on average in loan syndications. Policy-makers should perhaps focus more on monitoring the concentration of credit risk associated with syndicated loans held on the books of poorly performing banks.

Suggested Citation

  • Yener Altunbaş & Blaise Gadanecz & Alper Kara, 2006. "Banks’ and Financial Institutions’ Decision to Participate in Loan Syndications," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Syndicated Loans, chapter 6, pages 101-125, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-59723-5_6
    DOI: 10.1057/9780230597235_6
    as

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