The Canadian Bankers Association (CBA) today announced the standardization of key provisions to be included in syndicated credit agreements between banks and corporate borrowers. The provisions, along with measures to enhance transparency, are intended to promote liquidity in the Canadian bank loan market. The new initiatives will take effect on November 1, 2004 for new and refinanced loans.

Up until now, the CBA says, the trading of loans has been time-consuming and inefficient because documentation has lacked standardization. Now, the Canadian banking community has joined together to standardize provisions that will be applied to loan documents to speed up and streamline the process of loan trading.

The provisions cover, among other topics, borrower and agent consent in connection with loan assignment and certain market mechanics.

“Borrowers and investors benefit from these improvements,” said Chuck Winograd, president and CEO of RBC Capital Markets and chair,am of the CBA committee responsible for this issue, in a release. “We expect to see expansion in the market and the potential credit capacity available to borrowers as well as more transparency for borrowers regarding terms and conditions of the loan market.”

“In addition, greater transparency of transaction terms and conditions is expected to benefit loan investors,” added Winograd.

The CBA says transparency will also be enhanced by deepening the pool of available data for borrowers and investors, which will include both deal-specific and market aggregate information.

The CBA notes that here has been substantial growth in the secondary loan market over the last 10 years in the United States.

It says the Canadian banking community has developed these measures because it wants to also encourage an effective and equitable Canadian marketplace that is dynamic, transparent and responsive to the needs of borrowers and investors.

The secondary loan market is the loan trading market, or secondary distribution channel, for syndicated loans. Syndicated loans are large loans where a group of banks works together to provide funds to one borrower, thereby mitigating risk. The primary participants are major banks but, with syndicated loans being increasingly viewed as an asset class, there is an increase in the participation of non-bank institutional investors.