Loan syndication is a group of lenders making one loan together under a single credit agreement, with one lender arranging it and acting as agent.
When a loan is larger than one lender wants, or is allowed, to hold, lenders share it. In a syndication each lender signs the same credit agreement and is a direct lender to the borrower for its share. One of them, the agent, collects payments, passes them on and speaks for the group. In a participation, by contrast, one lender makes the loan and then sells pieces of it; the buyers have a contract with that lender, not with the borrower.
Federal bank regulators review the largest shared loans each year. Their program counts a loan as a shared national credit when the commitment totals $100 million or more and it is shared by three or more unaffiliated supervised institutions. The line was $20 million until January 1, 2018.
Most borrowers on this site will meet the smaller version: two or three community banks sharing a loan that is over one bank’s limit. Ask who the agent is, since that bank is the one you will deal with, and whether changes to the loan need every lender to agree.
How it shows up in the data here
Syndicated loans are not separately marked in the files used here. A bank's share of one sits inside its balances held by loan type, and the call report does not say which loans are shared. Credit unions do report commercial participations bought, which this site shows: search lenders that buy participations. For a loan too large for one bank, the legal lending limit estimate shows why.
Go further
- Lenders that buy participations: Credit unions reporting commercial participations.
- Legal lending limit estimate: A rough largest single loan for a bank.
- Legal lending limit estimate: The most a bank can lend to one borrower, from public capital figures. Always an estimate.
- Loan participations, explained: A participation lets one lender make a loan that is too large for it to hold alone. The borrower signs with one lender. Behind that lender, others own pieces of the loan and share its risk.
- The legal lending limit, explained: A bank may not lend more than a set share of its capital to one borrower. The rule explains why a large loan gets shared, and why a lender can say a request is too big for it.
Related terms
- Loan participation: A loan in which other lenders buy shares from the lender that made it, under a written agreement that keeps the first lender in the loan for its whole life.
- Originating lender: The lender the borrower first contracts with, which then sells participations in the loan to other lenders and stays in the loan itself.
- Participant lender: A lender that buys a share of a loan another lender originated. It takes part of the credit exposure, usually without dealing with the borrower directly.
- Legal lending limit: The most a bank may have outstanding to one borrower by law. For national banks it is 15 percent of capital and surplus, plus 10 percent more when the extra is fully secured by readily marketable collateral.
- House limit: A cap a bank sets for itself, below the legal lending limit, on how much it will hold for one borrower, one property type or one market.
- Intercreditor agreement: A contract between two or more lenders to the same borrower that sets whose lien and payments come first and what each may do if the borrower defaults.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.