On October 12, the National Financial Regulatory Administration released the “Management Measures for Syndicated Loan Business” (hereinafter referred to as the “Measures”), marking a revision of the “Guidelines for Syndicated Loan Business” from 2011. The new Measures specify that the distributing, granting, and recovering of syndicated loans must be managed by a lead bank, prohibiting individual members from bypassing the lead bank to directly issue or recover loans.
**Incorporation of Group Syndicated Models**
Syndicated loans refer to loans provided by two or more banks under the same loan agreement, issued through a lead bank to a borrower, usually involving both domestic and foreign currency.
According to the Measures, larger group clients, substantial project financing, and significant liquidity financing situations—defined by instances where risk exposure from a single client or group of related clients exceeds 2.5% of the lead bank’s Tier 1 capital or where the total credit for one group client surpasses 15% of its capital—are encouraged to utilize the syndicated loan approach during competitive negotiations for project financing.
The Measures optimize requirements for banks engaging in syndicated loan business in terms of organization models, distribution ratios, and secondary market transfers. Notably, the transition from “Guidelines” to “Measures” also introduces enhanced supervisory and regulatory provisions.
Under the new Measures, the group syndicated model allows syndicates to provide loans with varying terms, such as duration and interest rates, while maintaining uniform conditions within specific groups. Typically, no more than three groups are allowed, and each group must consist of at least two banks, although a single bank may only be represented in one group. A unified lead bank must also be appointed.
**Reduction of Lead Bank’s Loan Share**
The Measures redefine roles within the syndicated loan structure, typically outlining lead banks, agent banks, and participating banks, which can also serve multiple roles. The lead bank, with borrower consent, takes responsibility for organizing the syndicate and distributing loan shares. Depending on the size and structure of the syndicate, additional roles like co-lead and deputy lead banks may be established, sharing responsibilities as dictated by the Measures and loan agreements.
From a distribution perspective, the new guidelines have adjusted the minimum share for lead banks. Previously set at 20% for loan acceptance and 50% for distribution, these figures have been lowered to 15% and 30%, respectively. Furthermore, when co-leads or deputy leads are introduced, their share cannot drop below 10% of the total financing amount and must not exceed 70% among participating banks.
Zeng Gang, director of the Shanghai Financial and Development Laboratory, commented that the new regulations on syndicated loans will enhance the operational efficiency of bank lending. The lower thresholds for lead banks are expected to reduce their burden and improve the overall efficiency of syndicate formation.
**Allowance for Transfer of Syndicated Loan Balances**
The Measures clarify regulations surrounding the transfer of bank loans. They define syndicated loan transfers as the process wherein a lender in a syndicate as the transferor sells its share of the loan to another bank or a financial institution recognized by the regulatory authority.
Concerning secondary market transfers, banks are permitted to transfer part of the remaining balance or loan amount but can only do so based on proportional splits of unpaid principal and interest. Transfers must adhere strictly to the authenticity principle, ensuring genuine asset transfers and risk management. Any attempt to circumvent regulations through agreements such as repos is strictly prohibited.
A representative from the regulatory administration emphasized that this move aims to invigorate the secondary market for syndicated loans, unlocking dormant credit resources. Banks must register transactions in advance on approved platforms by the regulatory authority.
**Prohibition of Bypassing Agent Banks for Loan Issuance**
Addressing existing confusion regarding roles of lead and agent banks and the issue of fragmented management, the Measures clarify their respective responsibilities. The new guidelines dictate that both lead and agent banks must possess the necessary business capabilities and expertise, allowing for the possibility of appointing deputy or co-lead banks, although only one agent can be designated for any given operation.
Industry experts believe that implementing the Measures is crucial for refining bank lending management. They reflect a problem-oriented approach that fosters innovation while maintaining balance—ultimately facilitating high-quality financial services for economic and social development while enhancing interbank cooperation and effectively mitigating credit risks. Looking ahead, the regulatory body plans to reinforce oversight and support the effective implementation of these Measures to ensure the sustainable and healthy growth of the syndicated loan market.
It is also noteworthy that village and town banks are generally prohibited from participating in syndicated loan issuance, while rural commercial banks, cooperative banks, and credit unions will operate according to regulatory guidelines specific to their sectors.
