Who Lends Before Banking Crises? Evidence from the International Syndicated Loan Market.

This article investigates how lender heterogeneity influences credit booms that precede banking crises, focusing on foreign lenders and lenders with low market shares in host countries. Using data from international syndicated loans across 46 countries from 1986 to 2016, the study finds that these less established lenders disproportionately increase credit extension during precrisis periods, particularly to riskier and less collateralized borrowers, often with shorter loan maturities and fewer covenants. In contrast, well-established lenders with high market shares tend to restrain lending and reduce exposure to risky borrowers before crises. The findings suggest that the composition of credit supply—specifically the rising share of foreign and low market share lenders—can serve as an early indicator of financial instability, with implications for macroprudential policy design and crisis prediction models.