A syndicated loan (syndicated bank facility) is a large loan in which a group of banks work together to provide funds for a borrower. There is usually one lead bank that takes a percentage of the loan and syndicates the rest to other banks. A syndicated loan is the opposite of a bilateral loan, which only involves one borrower and one lender .

Like insurance, a loan is an assumption of risk. If the banks cost of funds is a hypothetical 5%, it needs to charge more than 10% interest on the loan to make a profit. In general, banks and the financial markets use risk-based pricing, charging an interest rate depending on the risk of the loan product in general or the risk of the specific borrower. So if the bank only has one large business loan, if that business happens to be one of the 5% that defaults, then the bank loses all its money. For this reason, it is in the best interest of all banks to split, or “syndicate” their large loans with each other, so each get a representative sample in their loan portfolios.

A second, often criticized reason for syndicating loans is that it avoids large or surprising losses and instead usually provides small and more predictable losses. Smaller and more predictable losses are favored by many management teams because of the general perception that companies with “smoother”, or more steady earnings are awarded a higher stock price relative to their earnings (benefiting management who is often paid primarily by stock). Critics such as Warren Buffett, however, say that many times this practice is irrational. If the bank could still get a representative sample by not syndicating, and if syndication would reduce their profit margins, then over the long term a bank should make more money by not syndicating. This same dynamic plays out in the investment banking and insurance fields, where syndication also takes place.

To avoid that the borrower has to deal with all syndicate banks individually, one of the syndicate banks usually acts as an Agent for all syndicate members and acts as the focal point between them and the borrower.

Largest Syndicated lenders in the United States in 2006
Name and market share:
* JP Morgan 28.9%
* Banc of America Securities LLC 21.4%
* Citigroup 14.7%
* Wachovia Corp 5.6%
* Wells Fargo 4.8%
* Deutsche Bank AG 3.4%
* Royal Bank of Scotland Group 2.1%
* Goldman Sachs & Co 2.0%
* Merrill Lynch & Co Inc 1.9%
* Barclays Capital 1.8%
* Credit Suisse 1.8%

Syndicated loans in Europe
In Europe the market for syndicated loans is much smaller than in the US, although many banks start joint ventures e.g. on bigger real estate finance transaktioncs. As american banks establish their business in Europe also the european banks start to expand their syndicated loan departments within their Dept Capital Markets departments. Ín the EMEA region this market will be largly expanding over the next years.