The European Commission examines competitiveness of syndicated loans

Hungary

In a recent example of enforcement affecting the banking sector across Europe, the European Commission (“Commission”) will look into the competitive aspects of syndicated loans.

A syndicated loan is a joint loan by two or more banks and institutional investors. Syndicated loans are important because they reduce the risks borne by a single bank, and they also play a crucial role in ensuring funding for large investments. The ever-growing importance of loan syndication has attracted the interest of EU antitrust regulators.

The Commission will select a third party in an open tender to perform a comprehensive preliminary study (“Study”) into the subject matter. This Study will focus on exploring the competitive features of the EU loan syndication market with special emphasis on loan origination and formation, the operation of the syndicate, and refinancing. The Study will focus on six countries: Germany, France, the Netherlands, Poland, Spain and the UK. It will consist of telephone interviews and questionnaires sent to lenders and borrowers, and could take up to nine months to complete. Addressees of such inquiries shall be careful when responding.

Apparently, the Commission is of the view that syndicated loans may provide an opportunity for competing banks and investors to cooperate closely, potentially giving rise to price coordination or market-sharing – serious offences in competition law. Bidding together for financing also raises the question of whether alternatives for borrowers have been limited, thus restricting competition. Exchanging commercially sensitive information during the loan-origination phase or in the course of the execution of the loan agreement may also raise issues. Based on the findings of the Study, the Commission will be in the position to decide on potential enforcement steps, such as launching a sectoral inquiry (with in-depth information requests) or conducting raids followed by formal investigations.

We will provide an update as soon as there are any developments about this study.

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