Project Of Constructing A Large Dam

2806 Words Jan 21st, 2015 12 Pages
With the reflection to the facts above I would start my advice to the bank by emphasizing that syndicated loans are very common in projects that require a high capital, as to the project of constructing a large dam.
When investors or borrowers approach banks to lend them for a huge amount of money for such projects as the construction of the dam, banks are unwilling or incapable of supplying the borrowers demand through a bi-lateral loan agreement ; Banks are restricted to take funded exposure on a single borrower to up to 15% of their capital, and non-funded exposure up to 20% of their capita .
Sometime banks can’t fund an entire project because they do not wish to in-crease assets to their balance sheets by adding large loans when
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In Addition, syndicated loan are international in their nature, the borrower could according to fluctuating interest rate change the currency of the loan.
Syndicated loans also permits banks to have more diversity and also expand their lending to broader geographical areas and industries. Syndicated loans are also very beneficial to small banks who aren’t usually able of funding a high capital projects, but through syndicated loans small banks can lend to borrowers in regions and industries which they might not be able to fund in other cases, it also allows them the exposure to large borrowers which they couldn’t lend in bilateral lending.
Participating in a syndicated loan gives banks the opportunity to achieve diversification in their own loan portfolios and liquidity. One of the main advantages of syndicated loans is the fact that participating banks share the risks of the lending, therefore they can participate in a big project which would enhance their name and yet the losses would be shared with other banks and the losses would be less than if they funded the loan alone, that is of course in case of default. In addition, participating banks play an important role by providing informative opinions and expertise and financing options to the
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