The most important determinant of bank loan pricing is not borrower risk or other conventional variable but whether the interest rate is pegged to the Prime Rate or to a market index such as Livor. Controlling for the difference in level among such benchmarks, and for many other variables explanatory of bank loan pricing, Prime-based borrowers paid 140-150 basis points more on average during 1990-1995.
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Paper provided by Columbia - Graduate School of Business in its series Papers with number
96-22.
Find related papers by JEL classification: G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
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