DETERMINANTS OF SPREAD ON SYNDICATED LOANS TO THE TURKISH BANKING SECTOR

The interest rate charged on a syndicated loan consists of two parts: a floating base rate, which is usually an internationally recognized benchmark rate such as Libor or Euribor and a fixed interest rate spread over the base rate. The aim of this study is to analyze the determinants of spread on the syndicated loans granted between 2003 and 2012 to the banks operating in Turkey. The variables that are thought to be effective are investigated in five groups: global, macroeconomic, barrower, loan and syndicate variables. The results show that changes in the global financial conditions have a significant impact on the spread and lenders that mostly consist of foreign banks, take macroeconomic factors into consideration when they determine the spread, even though the share of syndicated loans in Turkish banking sector and Turkey’s total foreign debt is very low. It is also found that while barrower characteristics have a significant effect on spread, loan specific factors and the structure of the syndicate are insignificant.