Anti-trust enforcement—assessing the loan syndication market

Anti-trust enforcement—assessing the loan syndication market

Francesco Liberatore, partner at Squire Patton Boggs, examines the European Commission’s final report, ‘EU loan syndication and its impact on competition in credit markets’, which evaluates the loan syndication market and whether lenders in certain Member States are able to violate anti-trust rules when collaborating in loan syndication work.

Original news

On 5 April 2019, the European Commission published its final report on EU loan syndication and its impact on competition in credit markets, focussing on specific segments of the syndicated loan market, namely those connected with leveraged buy-outs (LBOs), project finance and infrastructure finance. The aim of this market study was to assess the loan syndication market in terms of its effectiveness and functioning, and to identify potential competition concerns. The study concentrates on those Member States that are the most significant in terms of the location of borrowers, lenders and investors, which are France, Germany, the Netherlands, Poland, Spain and the UK.

What is the background to the report?

The European Commission’s interest in syndicated lending is not new. In its 2017 management plan, the European Commission had indicated that it would engage in a study on potential competition issues relating to loan syndication. At the time, the European Commission described this as an area that:

‘Exhibits close co-operation between market participants in opaque or in transparent settings, such as over-the-counter activities, which are particularly vulnerable to anti-competitive conduct.’

The European Commission is not alone in expressing an interest in the sector. The Spanish Competition Authority and the UK’s Financial Conduct Authority (FCA) have both investigated instances of alleged collusion in the manipulation of price for syndicated lending, although the UK probe was resolved by way of commitments, while the Spanish case resulted in an infringement decision.

Against this background, after nearly two years, the study (prepared by Europe Economics and Euclid for the European Commission) is the first comprehensive assessment of this segment of the capital markets and aims to identify whether lenders may violate anti-trust rules when working together in loan syndication scenarios. It focuses on six Member States (France, Germany, the Netherlands, Poland, Spain and the UK). The analysis examines three specific segments of the syndicated loan market:

  • LBOs
  • project finance (PF)
  • infrastructure

While the European Commission explicitly notes that it has not taken a position on what is falling within or outside the scope of anti-trust rules regarding syndicated lending, the 324-page study has the potential of making syndicated lending the next frontier of anti-trust enforcement within the financial services sector, after foreign exchange.

What issues or areas of concern have been identified?

A

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About the author:

Meet Neil:

1. Banking and finance lawyer with particular experience in asset finance

2. Likes Wales, wine, sport and anything else that means he doesn’t have the time to have to write personal information about himself

3. Thinks the law is a far broader topic than any of his family and friends who do not work in law

Neil specialises in banking and asset finance transactions with a particular emphasis in finance for shipping, aviation and renewable energy, as well as providing corporate transactional support. He trained and qualified at TLT LLP and spent a further four years working as a finance solicitor, acting for borrowers and lenders before joining the Asset Finance team at DLA Piper (UK) LLP.