The syndicated lending market is highly globalized. We examine the effect of cross-country differences in capital regulations on the structure of global lending syndicates. Using a sample of loans syndicated by banks from 44 countries, we find evidence consistent with regulatory arbitrage incentives of participant banks. Banks from strictly regulated countries participate more in syndicates originated by banks from less regulated countries. This pattern is robust to controlling for characteristics of lead-participant bank pairs or holding fixed borrower-side conditions. Consistently, strictly regulated banks are more likely to participate in foreign-led loans to riskier borrowers, earn higher spreads, and bear higher credit risk.

Key words: Syndicated Loans, Cross-Border Banking, Banking Regulation, Capital Requirement, Regulatory Arbitrage.
JEL classification: G21, G30​