A syndicated loan (or "syndicated bank facility") is a large loan in which a group of banks work together to provide funds for a borrower. There is usually one lead bank (the "Arranger" or "Agent") that takes a percentage of the loan and syndicates the rest to other banks. A syndicated loan is the opposite of a bilateral loan, which only involves one borrower and one lender (often a bank or financial institution.) A loan is a type of debt. ... // [edit] Etymology The word comes from French syndicat which means administrator especially in matters regarding a certain geographical area, from the Latin word syndicus which in turn comes from the Greek word σύνδικος (syndikos) which means caretaker of an issue, compare to ombudsperson or representative. ... In finance, a Borrower is being referred to as the person or company which a person or company has lent financial funds (money) to (the Lender. ... ...

Reasons for syndicated lending

Like insurance, a loan is an assumption of risk. For a certain class of loan, with certain rules, the bank might believe that it is likely that 5% of all borrowers may go bankrupt. If the banks cost of funds is a hypothetical 5%, it needs to charge more than 10% interest on the loan to make a profit. In general, banks and the financial markets use risk-based pricing, charging an interest rate depending on the risk of the loan product in general or the risk of the specific borrower. The problem with larger businesses loans however, is that there are fewer of them. So if the bank only has one large business loan, if that business happens to be one of the 5% that defaults, then the bank loses all its money. For this reason, it is in the best interest of all banks to split, or "syndicate" their large loans with each other, so each get a representative sample in their loan portfolios. Risk-based pricing is the practice in the financial services industry to charge different interest rates on the same loan to different people, depending on their credit score and other factors which make it seem like they are more likely to not pay back the loan. ... Sampling is that part of statistical practice concerned with the selection of individual observations intended to yield some knowledge about a population of concern, especially for the purposes of statistical inference. ...

A second, often criticized reason for syndicating loans is that it avoids large or surprising losses and instead usually provides small and more predictable losses. Smaller and more predictable losses are favored by many management teams because of the general perception that companies with "smoother", or more steady earnings are awarded a higher stock price relative to their earnings (benefiting management who is often paid primarily by stock). Critics such as Warren Buffett, however, say that many times this practice is irrational. If the bank could still get a representative sample by not syndicating, and if syndication would reduce their profit margins, then over the long term a bank should make more money by not syndicating. This same dynamic plays out in the investment banking and insurance fields, where syndication also takes place. Warren Edward Buffett (b. ...

To avoid that the borrower has to deal with all syndicate banks individually, one of the syndicate banks usually acts as an Agent for all syndicate members and acts as the focal point between them and the borrower. In finance, a Borrower is being referred to as the person or company which a person or company has lent financial funds (money) to (the Lender. ... // [edit] Etymology The word comes from French syndicat which means administrator especially in matters regarding a certain geographical area, from the Latin word syndicus which in turn comes from the Greek word σύνδικος (syndikos) which means caretaker of an issue, compare to ombudsperson or representative. ... BRD-SG in Iaşi - A small branch dedicated to retail services For other uses, see Bank (disambiguation). ... // [edit] Etymology The word comes from French syndicat which means administrator especially in matters regarding a certain geographical area, from the Latin word syndicus which in turn comes from the Greek word σύνδικος (syndikos) which means caretaker of an issue, compare to ombudsperson or representative. ... BRD-SG in Iaşi - A small branch dedicated to retail services For other uses, see Bank (disambiguation). ... Agency is an area of law dealing with a contractual or quasi-contractual relationship between at least two parties in which one, the principal, authorizes the other, the agent, to represent her or his legal interests and to perform legal acts that bind the principal. ... // [edit] Etymology The word comes from French syndicat which means administrator especially in matters regarding a certain geographical area, from the Latin word syndicus which in turn comes from the Greek word σύνδικος (syndikos) which means caretaker of an issue, compare to ombudsperson or representative. ... In finance, a Borrower is being referred to as the person or company which a person or company has lent financial funds (money) to (the Lender. ...

Largest Syndicated lenders in the United States in 2006

Name and market share:

• JP Morgan 28.9%
• Banc of America Securities LLC 21.4%
• Citigroup 14.7%
• Wachovia Corp 5.6%
• Wells Fargo 4.8%
• Deutsche Bank AG 3.4%
• Royal Bank of Scotland Group 2.1%
• Goldman Sachs & Co 2.0%
• Merrill Lynch & Co Inc 1.9%
• Barclays Capital 1.8%
• Credit Suisse 1.8%

John Pierpont Morgan John Pierpont Morgan I (April 17, 1837 – March 31, 1913) was an American financier and banker, who at the turn of the century (1901), was one of the wealthiest men in America. ... Citigroup Inc. ... A typical Wells Fargo branch, located in Berkeley, California Norwest redirects here. ... Headquarters of the Deutsche Bank in Frankfurt am Main Deutsche Bank AG (German for German Bank) is a multinational bank operating worldwide and employing almost 70,000 people (2004). ... The Royal Bank of Scotland (LSE: RBS) is one of Scotlands four national clearing banks and one of the oldest in the UK, founded in Edinburgh in 1727 by Royal Charter. ... The Goldman Sachs Group, Inc. ... Barclays Capital is the investment banking division of Barclays Bank plc. ... The Credit Suisse Group (SWX:CSGN, NYSE: CS) is a financial services company, headquartered in Zürich, Switzerland. ...

Syndicated loans in Europe

In Europe the market for syndicated loans is much smaller than in the US, although many banks start joint ventures e.g. on bigger real estate finance transactions. As american banks establish their business in Europe also the european banks start to expand their syndicated loan departments within their Dept Capital Markets departments. Ín the EMEA region this market will be largly expanding over the next years. EMEA can mean: Europe, the Middle East and Africa European Medicines Agency This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ...

External links

• Syndicated Loan