LOAN SYNDICATION IN BANKS
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LOAN SYNDICATION IN BANKS
1.1 GENERAL INTRODUCTION TO LOAN SYNDICATION IN BANKS
Loan syndication is an interbank arrangement that allows banks to work together to finance a project. When a client’s borrowing needs are exceptionally vast and the risk of exceeding one bank’s capacity is relatively low, as is frequently the case with major industrial, commercial, or agricultural projects.
To answer such financing requests, one bank forms a consortium of banks in close collaboration with the customer syndicate. The organising bank is known as the lead or managing bank,
the loan is known as a consortium loan, the participating banks are known as loan syndication, and the loan syndication process is known as loan syndication.
The corporate loan syndication group (CLSG) buys and sells loan interest in the corporate and commercial real estate sectors. Corporate loan syndication includes:
– Make use of financing
– Manufacturing in the middle market
– Commercial financing firm
– Cable and telephone businesses. Syndication in the real estate sector involves the following:
– Property funds pooled
– Building and development
A typical aspect of International Merchant Bank loan syndication management is traditional asset management. Loan syndication management is the act of managing a pool of interbank relationships and their funds in such a way that it not only retains its original value but also appreciates in value and generates an appropriate return, consistent with the level of risk involved.
As a result, the goal of this researcher is to investigate syndication management strategy in international merchant banks and determine if it is influenced in any way by the nature of the bank’s loans and advances, whether that influence is favourable or negative. Ansoff (1965) asserts.
Profit has traditionally been the measure of success in a commercial firm; it is this measure that distinguishes a business organisation from all other types of social organisation.
The type of the project, profitability, cash flow condition, and maturity pattern of the banks are all likely to influence a bank’s decision to engage in a specific investment channel. The importance of these numerous elements in syndication assessment varies each bank, based on the character of the management and the overall business environment.
International merchant banks operate in the environment specified by the bank Act’s provisions. Banking business is described in this Act as “the business of receiving money from outsiders as deposit, regardless of the payment of interest and the granting of loans.”
Advances and acceptances of credit, purchases and sales of securities, incurring obligations to acquire claims in respect of loans prior to maturity, or assuming guarantee and other warrantees for others,
or effecting transfers and clearing such other transactions as the minister may, on the recommendation of the central bank order published in the federal government gazette designated as banking business. It is clear that loan syndication management fits within the designated domain of banking operations.
Merchant banks have different functions, objectives, operations, and settings than commercial banks. This Act of 1968 provides that merchant banks may engage in all types of banking activities that commercial banks do, with the exception of operating current accounts for modest savings.
Merchant banks are authorised to help channel liquidity into the economy by making medium and long-term investments, as well as to provide specialised services such as equipment leasing, corporate financing, project preparation, debt factoring, and advisory services, among other things.
The universal banking provision. Because international merchant banks typically deal with large customers, they are expected to operate at a higher level of efficiency. They must also manage their syndication more properly in order to maximise their revenues.
STATEMENT OF THE PROBLEM
The study was meant to contribute to the literature on the subject of loan syndication management by analysing how international merchant banks select securities for loan syndication and how these loans are handled until their various maturity dates. The researcher is looking for replies to the following questions:
What are the goals of loan syndication?
b. What issues have arisen in the efficient management of loan syndication?
c. How does loan syndication management affect the operation of an international merchant bank?
d. How can loan officers choose an effective syndicate?
g. Evaluation of the overall performance of the bank’s loan syndication department
f. What role do government directives play in bank syndication?
THE PURPOSE OF THE STUDY
Given the critical requirement for an effective loan syndication management work, the purpose of this research is to investigate loan syndication management at an international merchant bank. This study is being conducted to accomplish the following goals:
a. To investigate the pattern and lending practises of international commercial banks and to propose solutions to problems that are uncovered.
b. Determine the impact of central bank standards on loan syndication management in an international merchant bank.
c. Determine the effectiveness of loan syndication management in an international merchant.
RESEARCH QUESTION
The following questions aided the research in efficiently achieving the objective of this research endeavour.
a. What are international merchant bank lending practises?
b. What are the loan syndication management credit guidelines in an international merchant bank?
c. Is loan syndication management in an international merchant bank efficient?
THE SIGNIFICANCE OF THE RESEARCH
The study’s conclusions will emphasise the necessity of loan syndication management to syndication managers. It will offer information to all merchant banks and other lending-related businesses.
Furthermore, this study will be of tremendous use to institutions of higher learning and those planning further research in this field. Finally, the study will contribute to the area’s continually increasing amount of life rafure.
I also attempted to provide insight into the issues that foreign merchants face while carrying out their loan practises and examined the amount to which they cope with their syndication management practises.
SCOPE OF THE RESEARCH
The research was limited to an international merchant bank (IMB) in Port Harcourt, with the goal of analysing the bank’s loan syndication practises.
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