QUES.

Although a close lending relationship with a single bank can be valuable to a borrowing firm, the bank gains monopoly power over the firm as it gains better information about the firm other than potential lenders. This idea was first articulated by the Banking scholars in the 1990s and it is, therefore, inevitable that a firm moves from a single lending relationship to a multiple lending one.

In a syndicated loan market, large firms with new projects gain much in terms of better pricing and ease of getting a deal through. From the bankers" perspective, loan syndication permit banks to make loans to relatively large firms while maintaining a diversified loan portfolio. Based on the above and the information in general briefly discuss the following.

a) What are the benefits of syndicated loans to the borrowing firms?

b) What is the incentive/s available to the lending banks in case of syndicated loans? Is it different from Consortium Funding?