How Syndicated Lending Turns Small Shocks Into A Big Problem
A new BIS working paper finds that syndicated interconnectedness causes relatively mild shocks, if they affect the entire network, to be more problematic than the failure of a single active member
In 2007, before the financial crisis started unfolding, syndicated loans made up 40% of cross-border funding to US companies and two-thirds of cross-border funding to emerging markets, and banks rapid withdrawal from syndicated lending appears to be one of the main channels that allowed the stress to propagate through the financial system . . .
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