Mind the Gap: The Difference between U.S. and European Loan Rates
55 Pages Posted: 30 Nov 2013 Last revised: 4 Sep 2017
Date Written: July 12, 2016
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
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