Syndicated Loans Explained

This is another variant of the market and in this case the borrower approaches the bank to get finance.

The bank doesn't take the whole amount of the loan onto its own books but rather gets in touch with other banks and they participate, each of them, with a particular amount of the loan - and hence this is a process of syndication going on.

This is a little like the placing of a bond.

So why would there be syndication, what are the reasons for it? Well there are two main ones.

The first is that it allows the banks to limit the exposure they take with each client and currency which is attractive for them

It also allows the borrower to get hold of the sum of money that they need and would usually get through bond markets but rather to get hold of the money through the banks instead.

For once this is something that is not actually tradable, yes such a thing does exist, and this sort of debt vehicle is not publicly available either.

Related Articles

Money and Equity Market Relationships
Bond terms explained: Covenant
Other Bond Redemption Types
The Interest Rate Cycle
Investments and the Yield
Getting a Water Meter Fitted

More Stocks and Shares Articles