Consolidation obligation: banks must ensure that their exposure does not exceed the prudent commitment ceiling (maximum 15% of their capital fund for individual borrowers and 40% for group borrowers). Before we get into the details and better understand, a rough idea of the concepts of credit syndication and consortium is needed. « A configuration in which a group of individuals or companies decides to pool the resources necessary to execute a debt or finance a single borrower, the entity being governed by a legal contract that delegates responsibilities between its members is called a consortium, » while a credit syndicate is a similar process, with the term generally reserved for loans, that include international transactions. Different currencies and banking cooperation necessary to guarantee payments and reduce exposure are managed by a managing bank, which is approached by the borrower to arrange loans. Two banking experts who did not want to be quoted said there were cases where foreign and private banks were not part of a consortium and had bilateral credit agreements with the borrower. Asked whether this would lead to procedural delays and increase costs for banks and borrowers, the SBI official said: « On the contrary, the whole purpose (of the consortium) is to streamline decision-making and make costs uniform. Syndicated credit means that two or more banks allow correspondence banks to provide loans and credit and credit operations to borrowers for a specified period and ratio, based on the same credit terms and credit agreement. The major syndicated credit banks are the organizers and arrangers of syndicated loans who sponsor consortia and are responsible for the distribution of syndicated loan shares. A credit synchronization is similar to a consortium, although there are structural and operational differences between the two.
As in the case of a credit transaction, syndicated financing is done for transactions that may not take place with a single lender. Several banks agree to jointly supervise a borrower with a common assessment, documentation and monitoring and to hold equal shares in the transaction. Unlike credit syndication, there is no spring bank to manage the financing project; all banks play an equal role in project management. The banks in the consortium are bound by the following procedures: The information you offer should be in line with floating commitments and medium- or long-term loans, based on 1.To usage-based information on borrowers, foreign and Chinese shareholders as well as guarantors. . . .