Joining forces: why banks syndicate credit

Steven Ongena, Alex Osberghaus and Glenn Schepens

No 3149, Working Paper Series from European Central Bank

Abstract: Banks can grant loans to firms bilaterally or in syndicates. We study this choice by combining bilateral loan data with syndicated loan data. We show that loan size alone does not adequately explain syndication. Instead, banks’ ability to manage risks and firm riskiness drive the choice to syndicate. Banks are more likely to syndicate loans if their risk-bearing capacity is low and if screening and monitoring come at a high cost. Syndicated loans are more expensive and more sensitive to loan risk than bilateral loans. Our findings contradict the hypothesis that reputable borrowers graduate to the syndicated loan market. JEL Classification: E44, E52, E58, E63, F45, G20, G21

Keywords: bank risk; firm risk; syndicated loans (search for similar items in EconPapers)
Date: 2025-11
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Related works:
Working Paper: Joining Forces: Why Banks Syndicate Credit (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253149

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