US lenders cautious in issuing European loans

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Banks in the US are cautious about lending to companies in Europe, they said Financial Times.

The Coronavirus Pandemic has caused big banks like JP Morgan, Goldman Sachs and Bank of America (BoA) to reduce the amount of credit or to break off financing talks.

“We are increasingly observing an ‘America first’ attitude among large US banks,” a consultant who is directly involved in bank negotiations with German companies told FT in a report on Friday (April 24). “… there is a clear pattern.”

JPMorgan ended talks about an additional credit line for German BASF, the world’s largest chemical company, according to sources involved in the transaction. The BoA gave Adidas a loan that was 50 percent smaller than the six international banks that had lent the sportswear giant € 3 billion ($ 3.25 billion) with government support.

Goldman Sachs turned down a € 12 billion ($ 13 billion) facility for Germany’s Daimler, which resulted in other banks having to take care of the entire loan amount.

“Every bank is under the supervision of their national supervisory authorities, which show an enormous home bias in times of crisis,” said Jan Pieter Krahnen, director of the Center for Financial Studies at the University of Frankfurt, according to FT. “This has a strong influence on risk management and regional engagement, which is at the expense of customers abroad.”

European regulators have noticed the trend of US lenders withdrawing, but a senior regulator told FT that they cannot “force them to lend.”

BoA, Goldman Sachs and JPMorgan claim they have increased global lending in the past few weeks. The BoA said that although its syndicated loans are in decline, it ranks second in the ranking of euro-denominated bonds.

JPMorgan pointed out that 50 percent of new loans of more than $ 25 billion will go to European companies.

“Our commitment to companies in the region remains unshakable,” said the FT.

UK government officials and corporations have fined financial institutions for doing so personal guarantees for emergency loans that are supported by the state.

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