The implications of syndicated loan regulations on the banking system

Abstract

The syndicated loan market has grown by over 2 trillion USD since the 1990s to become one of the most utilized means of funding large loans for governments and corporations. Banks syndicate loans to spread the risk, but syndicated loans have been tied to economic crisis and challenges in the banking system. In this dissertation, the focus was on determining the implication of syndicated loan regulations on the banking system following the 2007-2009 GFC. The aim of the dissertation was to establish how syndicated loan regulations following the Basel III Framework guideline have influenced the banking system. The focus was the EU, China, US and the ASEN region. It was found that the EU, USA and China have adopted the Basel III framework guidelines which have tightened their liquidity, capital and leverage requirements that have in turn enhanced the resilience of the banking systems. However, despite the implementation of various measures to regulate the syndicated loan market, it was found that banks still engage in risky syndicated loans which point towards the need for more specific and tighter regulations on information disclosure, especially ensuring there are publicly available information about borrowers to minimize information asymmetry, moral hazard and adverse selection in the different stages of loan syndication.