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The Syndicated Loan Market: Developments in the North American Context

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  • Jim Armstrong

Abstract

The author describes the rapid development of the syndicated corporate loan market in the 1990s. He explores the historical forces that led to the development of the contemporary U.S. syndicated loan market, which is effectively a hybrid of the investment banking and commercial banking worlds. He suggests that there has been a notable change in large corporate lending over the past decade, as the old bilateral bank-client lending relationships have been replaced by a world that is much more transaction-oriented and market-oriented. The Canadian syndicated loan market has been strongly influenced by its U.S. counterpart, but it is not yet at the same level of development. The author explores potential risk issues for the new corporate loan market, including implications for the distribution of credit risk in the system, risks in the underwriting process, the monitoring function, and the potential for risk arising from asymmetric information.

Suggested Citation

  • Jim Armstrong, 2003. "The Syndicated Loan Market: Developments in the North American Context," Staff Working Papers 03-15, Bank of Canada.
  • Handle: RePEc:bca:bocawp:03-15
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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp03-15.pdf
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    References listed on IDEAS

    as
    1. Dennis, Steven A. & Mullineaux, Donald J., 2000. "Syndicated Loans," Journal of Financial Intermediation, Elsevier, vol. 9(4), pages 404-426, October.
    2. John Kiff & Ron Morrow, 2000. "Credit Derivatives," Bank of Canada Review, Bank of Canada, vol. 2000(Autumn), pages 3-11.
    3. Katerina Simons, 1993. "Why do banks syndicate loans?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 45-52.
    4. Bank for International Settlements, 2003. "Credit risk transfer," CGFS Papers, Bank for International Settlements, number 20.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. Tykvova, Tereza, 2007. "Who chooses whom? Syndication, skills and reputation," Review of Financial Economics, Elsevier, vol. 16(1), pages 5-28.
    3. McCahery, Joseph & Schwienbacher, Armin, 2010. "Bank reputation in the private debt market," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 498-515, September.
    4. Yener Altunbas & Alper Kara & David Marques-Ibanez, 2010. "Large debt financing: syndicated loans versus corporate bonds," The European Journal of Finance, Taylor & Francis Journals, vol. 16(5), pages 437-458.
    5. Jonathan D. Jones & William W. Lang & Peter J. Nigro, 2005. "Agent Bank Behavior In Bank Loan Syndications," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(3), pages 385-402.
    6. Champagne, Claudia & Kryzanowski, Lawrence, 2007. "Are current syndicated loan alliances related to past alliances?," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3145-3161, October.
    7. repec:eee:corfin:v:49:y:2018:i:c:p:344-378 is not listed on IDEAS

    More about this item

    Keywords

    Financial institutions; Financial markets;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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