In general, non-banks exhibit a stronger home bias than banks, as foreign borrowers account for a smaller share in their syndicated lending. The difference in spreads largely reflects a riskier pool of borrowers and associated risk premia, rather than differences in loan terms.įinally, when facing domestic financial crises, non-bank arrangers retrench particularly forcefully from abroad. Second, loans arranged by non-bank lenders carry materially higher spreads than those arranged by banks. ![]() While non-banks' credit provision tends to ebb and flow with that of banks, it is more volatile and contracted more during the Great Financial Crisis (GFC). Non-bank lending is more concentrated by geographical location and sector than bank syndicated lending. ![]() Their share in total new syndicated lending fluctuated between 7% and 18% over the same period. ![]() Non-banks have increased their yearly syndicated lending twentyfold over the past three decades, serving borrowers in all major regions and sectors. In the wake of a crisis at home, non-banks curtail lending to foreign borrowers by more than they do to domestic ones, thereby transmitting shocks across countries.įirst, non-banks play an important role in the syndicated loan market, but their lending patterns differ from those of banks.It also carries higher spreads, partly reflecting riskier borrowers. Non-banks' syndicated lending is more concentrated across countries and industries than that of banks and it is more volatile.Non-banks' origination of syndicated loans to non-financial firms grew twentyfold from 1990, to $410 billion in 2019, and represents a sizeable share of the total in most regions and sectors.2 It further investigates the role of non-banks in cross-border spillovers during financial crises. This special feature provides the first systematic overview of global syndicated lending by non-banks and contrasts it with that by banks. As non-banks extend syndicated loans in a highly procyclical fashion (Fleckenstein et al (2021)) and access to syndicated credit affects firm performance (Chodorow-Reich (2014)), their ubiquitous presence could drive real economy developments. Non-bank lenders represent an important source of funding for non-financial corporates (NFCs) in general (Aramonte and Avalos (2021)) and through syndicated loans in particular (Elliott et al (2019)). The reach of non-banks extends beyond financial market conditions. With the March 2020 market turmoil serving as a case study, substantial efforts have been made to understand how such instability can unfold and what policy measures can mitigate it (Carstens (2021)). While they can contribute to a more diversified and efficient financial system, non-banks can also be a source of instability due to, for instance, liquidity mismatches (Aramonte et al (2021)). The increasing footprint of non-bank financial intermediaries has put them front and centre of policymakers' agendas. During domestic financial crises, they reduce this share further, exacerbating the global transmission of shocks. Non-banks generally grant a smaller share of their new loans to foreign borrowers than banks do. Syndicated loans arranged by non-banks carry a significantly higher spread relative to those by banks, consistent with the pattern that firms borrowing from non-banks are more leveraged and less profitable, ie riskier. ![]() Their loan origination, however, is more concentrated by location and sector than that of banks and it is also more volatile. Non-bank lenders are an important source of syndicated credit to non-financial corporates in most regions and industries.
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