US Lenders Cautious About Making European Loans Amid Pandemic

Banks in the U.S. are taking a cautious approach when it comes to extending loans to businesses in Europe, according to the Financial Times.

The coronavirus pandemic has caused big banks like JPMorgan, Goldman Sachs and Bank of America (BoA) to reduce the size of loans or cancel funding talks.

“We are increasingly observing an ‘America first’ attitude among large U.S. banks,” an adviser with direct involvement in bank negotiations with German corporates told FT in a Friday (April 24) report. “…there is a clear pattern.”

JPMorgan ended discussions regarding an additional credit line for Germany’s BASF, which is the biggest chemical company in the world, according to sources engaged in the transaction. BoA extended a loan to Adidas that was 50 percent smaller than the six international banks that loaned the sportswear behemoth 3 billion euros ($3.25 billion) backed by the state.

Goldman Sachs opted out of a 12 billion-euro ($13 billion) facility for Germany’s Daimler, which caused other banks to take care of the entire loan amount.

“Every bank is under the cosh of its national regulators, who in times of crisis show a huge home bias,” said Jan Pieter Krahnen, director of the Center for Financial Studies at the University of Frankfurt, according to FT. “This heavily influences risk management and regional exposure, which comes at the expense of clients abroad.”

European regulators have noticed the trend of retreating U.S. lenders, but a senior supervisory official told FT that they can’t “force them to lend.”

BoA, Goldman Sachs and JPMorgan maintain they have upped global lending in recent weeks. BoA indicated that even though its syndicated loans are down, it ranked second in league tables of euro-denominated bonds.

JPMorgan pointed out that 50 percent of more than $25 billion in new credit to European businesses.

“Our commitment to companies in the region remains unwavering,” it said, according to FT.

U.K. government officeholders and companies have chastised financial institutions for requiring personal guarantees for emergency loans that are backed by the state.