Blaise Gadanecz

The Term Structure of Credit Spreads in Project Finance

This paper finds that the term structure of credit spreads in project finance is hump-shaped. This contrasts with other types of debt, where credit risk is shown instead to increase monotonically with maturity ceteris paribus. We emphasize a number of peculiar features of project finance structures that might underlie this finding, such as high leverage decreasing over time, long-term political risk guarantees and the sequential resolution of uncertainty along project advancement stages. Our result is particularly relevant given the importance of project finance as a source of long-term capital for infrastructure especially in developing countries and has implications for risk management in the framework of Basel II. Copyright

Key factors affecting internationally active banks' decisions to participate in loan syndications

The impact of banks’ financial characteristics on their decisions to participate in loan syndications is assessed. From the analysis, it appears that poorly performing banks tend, on average, to be more involved in syndications. Policymakers should perhaps monitor more closely the concentration of credit risk associated with syndicated loans held on the books of under-performing banks.

The evolution of syndicated loan markets

This paper provides a historical perspective on the development of the global syndicated loan market, where

Spoilt and Lazy: The Impact of State Support on Bank Behaviour in the International Loan Market

2.6 trillion worth of funds were raised in 2004. The emergence of the Eurodollar market in the 1960s, the balance of payments problems of non-oil-exporting emerging countries in the 1970s, the Latin American financial crises and the US merger wave of the 1980s, and finally the competitive financial environment and the emergence of the secondary loan market during the 1990s are reviewed. These have been the most influential financial developments that shaped the syndicated loan markets in the last few decades.

Optimized Taylor rules with domestic bond yields in emerging market economies

We analyze the syndicated loan market activity of banks with high support ratings. We find evidence that they underprice risk. Controlling for other characteristics, loans arranged by supported banks have, on average, lower spreads. In addition, these banks retain loans that are, on average, priced below market. At the same time, we do not find evidence suggesting that supported banks play any special role through strategic loan participation. Compared with other banks, their loan portfolios are less specialized, are more closely aligned with prevailing market trends, and exhibit lower persistence in their sectoral allocations.

Introducing financial stability considerations into Taylor rules in emerging market economies

We study optimized Taylor rules with the appropriate lag structure, which has been little done for emerging market economies. Setting the policy interest rate in response to movements in domestic long-term bond yields, in addition to the output gap, the inflation gap and the exchange rate, can make monetary policy more effective. But a more complex rule can reduce monetary policy effectiveness, notably in the presence of uncertainty about the effects of capital flows on domestic monetary conditions.

Historical Analysis, 1970–2004

We study optimized Taylor rules that incorporate financial stability considerations, which have been little analysed for emerging market economies. Setting the policy interest rate with a greater financial stability consideration reduces monetary policy effectiveness: a greater effort to reduce output volatility in the nontradables sector, where asset bubbles are prone to build, leads to greater inflation volatility.

Banks’ and Financial Institutions’ Decision to Participate in Loan Syndications

Today’s syndicated loan market is a crucial element of the global financial system. According to Thomson Financial,

Syndicated Loans and the Financing of Distressed Emerging Markets

2.4 trn worth of syndicated loans were granted worldwide in 2004, amounting to no less than one-third of total international financing including bond and equity issuance. From modest volumes (

Facts and Figures, 1993–2004

7 bn) in 1972, lending on this market has developed in a spectacular way during the past three decades (Figure 3.1). This chapter draws a historical perspective of the global financial developments that have shaped the syndicated loan markets since the early 1970s. In this context, the emergence of the Eurodollar market in the 1960s, the balance of payments problems of non-oil exporting emerging countries in the 1970s, the Latin American financial crises and the US merger wave of the 1980s, and finally the competitive financial environment and the emergence of the secondary loan market during the 1990s, are found to be most influential economic events in advancement of syndicated loan markets.