Due to the long term, large amount and high bank risk of medium and long term bank credit, the borrower and borrower should sign a loan agreement, and the government of the borrower's country should provide guarantee.[1]
Features
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(1) It is relatively free in the use of funds and is not restricted by the lending bank.In international credit, export credit must purchase the export commodities of the lending country;Project loans are closely related to specific projects, and are earmarked for specific purposes;In general, government loans are also subject to restrictions on commodity procurement, that is, the borrowing country must purchase all or part of the goods of the lending country, and often requires the borrowing country to use some primary products (such as coal, oil, etc.) to repay all loans raised;Most loans from international financial institutions are also related to specific construction projects, requiring special funds for special purposes.The medium and long term bank credit is generally not related to export commodities or specific projects, nor designated use. The borrower can freely use the loan funds, so it is called Luyou foreign exchange loan.[1]
(2) Medium and long term bank credit funds are fully supplied and easy to borrow. Over the years, the loan amount has grown rapidly and each loan amount is large.For example, the total amount of deposits in European currency has increased from US $110 billion in 1970 to US $2056 billion in 1983, an increase of 17.7 times in 14 years.The scale of loans has also grown rapidly. In 1970, the amount of loans was only US $4.7 billion, increased to US $21 billion in 1975 and US $133.3 billion in 1981.The borrowing procedures of medium - and long-term credit in European currency are simpler than those of government loans and loans from international financial institutions, and the amount of each loan is much larger than the above two loans.The amount of each medium-term loan provided by the exclusive bank is tens of millions of dollars, and the amount of each medium-term and long-term syndicated loan can reach 5-1 billion dollars.
(3) The credit conditions of medium and long-term bank credit are more stringent, the loan interest rate is higher, and the loan term is shorter.The loan interest rate follows the market, generally based on the LIBOR, plus 1% additional interest rate and various fees, so the interest rate of medium and long-term bank credit is high.For example, at the beginning of July 1984, the six-month interest rate of Eurodollar short-term loans was 12.815%, while the total interest and expense level of medium and long-term loans was as high as about 15%.The term of medium and long-term loans in Eurocurrency is shorter. For example, the term of medium and long-term loans provided by exclusive banks is generally 3-5 years, and the term of medium and long-term syndicated loans is 5-1 lo years, which is much shorter than the term of government loans and loans from international financial institutions.
Credit mode
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Medium and long-term bank credit mainly includes exclusive bank loans and syndicated loans.The exclusive bank loan is also called bilateral medium-term loan. It is a loan provided by a loan bank in one country to a borrower in another country (bank, government, company, enterprise, etc.). Both lenders and borrowers need to sign a loan agreement. The loan cost is low, and only includes LIBOR, additional interest rate and commitment fee.Syndicated loan, also known as syndicated loan, is a well structured loan syndicate led by a loan bank and participated by several loan banks. Under the same conditions, it jointly provides a long-term huge loan to a borrower in a country.The cost of the syndicated loan is higher than that of the exclusive bank loan, including not only the LIBOR and the surcharges, but also various fees (bearing fees, agency fees, management fees, miscellaneous fees, etc.).In the international financial market, if the loan amount is large and the term is long, the medium and long-term credit generally adopts the syndicated loan to spread the credit risk.[1]
