Over recent months, there has been an increasing pressure for loan bankers to be more discreet about the deals they are working on – particularly in the case of borrowers in the CIS region. This pressure has come from two directions – both increasing uncertainty that loans will be completed and a mounting concern that banks will fall foul of regulatory enthusiasm in the wake of FX market scandals.
Keeping mum on transactions in the run up to signing them is an understandable response in such times. If it gives you a better chance of succeeding, there is less risk that the borrower loses face and mitigates against any accusation of banks colluding on pricing terms.
But it is more worrying if loan bankers are coming under pressure – both externally and internally – to maintain a cloak of silence even longer. Sources at different institutions say that this is already the case and that they have been told not to publicly acknowledge their involvement in loans to certain countries and borrowers even after the deals have been wrapped up.
Internally, pressure is coming from managers at the behest of jittery shareholders. They are unsettled by banks’ association with deals to unsanctioned borrowers in places like Russia, given the country’s stand-off with Nato over Ukraine. Yet they are not nervous enough to demand that such business entirely stops.
Pressure is, in some cases, also coming from borrowers themselves. GlobalCapital heard of one borrower that signed last week was adamant that nothing would be broadcast to the market – in a total ellipsis of the company's name, arrangers and league table accreditation.
Banks obviously have to live by their own conscience and their responsibility to their clients, but all of this smacks of dishonesty and hypocrisy. If banks are willing to take business from borrowers in Russia or anywhere else, then they should be willing to stand by their clients and decisions in public. Particularly if they are doing over 30% of their lending business in these countries, as some are.
Deviation from this principle makes one think of a well-known German expression: “Wash me, but don’t get me wet.”
Let's be clear that this is not the same principle at all as applies to other areas of secrecy around loans – such as pricing terms. That is a natural characteristic of the loan market, even if sometimes it is frustrating.
But if you don’t admit to doing deals at all then there is no market. That is what is at stake from a wider perspective. And not all banks and borrowers will give the same value to silence. Things will leak out, as they always do, and then banks will look bad for not having been forthcoming about it.
Another flaw in the approach that banks may care about more is that they will not get league table recognition for these deals. Then when managers come to their loan bankers at a later date and ask why they have dropped down the table, they will only have themselves to blame.
What might feel like short-term self-preservation is bad for the market as a whole, and will ultimately work against the banks themselves.
Signing multimillion dollar loan deals is not some inconsequential, transitory dalliance you can pretend never happened. If you’ve done the deed you should fess up.