Foreign Currency Lending

69 Pages Posted: 9 Aug 2018 Last revised: 20 Sep 2018

See all articles by Manthos D. Delis

Manthos D. Delis

Montpellier Business School

Panagiotis N. Politsidis

The University of Sydney

Lucio Sarno

City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Date Written: July 26, 2018


Lending to corporates in foreign currencies can expose banks to substantial currency risk. Using global syndicated loan data, we find that a one-standard-deviation increase in exchange rate volatility increases loan spreads by approximately 20 basis points for loans made in a currency different from the lenders’. This implies excess interest of approximately USD 2.55 million for loans of average size and duration. We show that our finding is mostly attributed to credit constraints and deviations from perfect competition in international lending markets. Borrowers can lower the extra cost by forming strong lending relationships with their banks.

Keywords: Global Syndicated Loans, Foreign Currency Lending, Exchange Rate Risk, Bank Market Power, Relationship Lending

JEL Classification: G21, F31, F33, F34

Suggested Citation

Delis, Manthos D. and Politsidis, Panagiotis N. and Sarno, Lucio, Foreign Currency Lending (July 26, 2018). Available at SSRN: or

Manthos D. Delis (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080

Panagiotis N. Politsidis

The University of Sydney ( email )

Rm 540, H-69 Codrington Building
The University of Sydney
Sydney, NSW 2006

Lucio Sarno

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Centre for Economic Policy Research (CEPR)

United Kingdom

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information