Of the $47 billion in term loans originated in 1988, banks, including lead banks and syndicate-participant banks, retained on their balance sheet 88.
Thus, for credit lines, syndicate-participant banks tended to offset the actions of the lead banks at origination, and they tended to hold the credit lines to maturity (or at least for three years).
We documented earlier that both lead banks and syndicate-participant banks continue to reduce the share of their term loans in the years following origination.
Our analysis of banks' role in financial intermediation reveals that beginning in the early 1990s, lead banks increasingly used the originate-to-distribute model in their corporate lending business.
In contrast, the secondary loan market is a seasoned market in which a bank, including lead banks and syndicate participants, can subsequently sell an existing loan (or part of a loan).
7) Recent studies, including Sufi (2007), Ivashina (2009), and Focarelli, Pozzolo, and Casolaro (2008), document that lead banks in loan syndicates use the retained share to align their incentives with those of syndicate participants and commit to future monitoring.
By lead banks' market or aggregate share, we mean the share of all credits that the lead banks, taken together, retain.
We begin by investigating how the rise of that model affected the portion of each credit that the lead bank retains during the life of the credit.
For each credit, we compute the portion that the lead bank sells to other banks and the portion that it sells outside the banking sector, distinguishing in the latter case whether the acquiring institution is an insurance company, a finance company, a pension fund, an investment manager, a private equity firm, a CLO, or a broker or investment bank.
These aggregate trends are consistent with the trends in the average share of the credit that the lead bank retains on its balance sheet.