Research-based policy commentary and analysis from leading economists
From credit risk to pipeline risk: Why loan syndication is a risky business
Max Bruche, Frederic Malherbe, Ralf R Meisenzahl 11 2017 september
Syndicated loan issuance has exploded significantly during the last 25 years. The syndicated loan business model has evolved, affecting the nature of the associated risks that arranging banks are exposed to over the period. The concept is introduced by this column of ‘pipeline’ risk –the risk linked with advertising the loans through the syndication procedure. Pipeline risk forces organizing banking institutions to keep much bigger stocks of extremely high-risk syndicated term loans, which results in reduced financing because of the bank that is arranging just when you look at the syndicated term loan market, however in other people aswell.
Syndicated loan issuance – by which banking institutions partner along with other institutions that are financial originate big loans – has grown significantly throughout the last 25 years. (daha&helliip;)