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Mind the Gap: The Difference between U.S. and European Loan Rates

55 Pages Posted: 30 Nov 2013 Last revised: 4 Sep 2017

Tobias Berg

Frankfurt School of Finance & Management

Anthony Saunders

New York University - Leonard N. Stern School of Business

Sascha Steffen

Frankfurt School of Finance & Management

Daniel Streitz

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: July 12, 2016

Abstract

We analyze pricing differences between U.S. and European syndicated loans over the 1992-2014 period. We explicitly distinguish credit lines from term loans. For credit lines, U.S. borrowers pay significantly higher spreads, but lower fees, resulting in similar total costs of borrowing in both markets. Credit line usage is more cyclical in the U.S., which provides a rationale for the pricing structure difference. For term loans, we analyze the channels of the cross-country loan price differential and document the importance of: the composition of term loan borrowers and the loan supply by institutional investors and foreign banks.

Keywords: Loans, corporate debt, fees, market integration, globalization

JEL Classification: G30, G20, G15

Suggested Citation

Berg, Tobias and Saunders, Anthony and Steffen, Sascha and Streitz, Daniel, Mind the Gap: The Difference between U.S. and European Loan Rates (July 12, 2016). Available at SSRN: https://ssrn.com/abstract=2361066 or http://dx.doi.org/10.2139/ssrn.2361066

Tobias Berg

Frankfurt School of Finance & Management ( email )

Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Sascha Steffen

Frankfurt School of Finance & Management ( email )

Sonnemannstr. 9 -11
Frankfurt, 60314
Germany

HOME PAGE: http://www.sascha-steffen.de

Daniel Streitz (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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