BANK LENDING TO LDCS - FROM THE EUPHORIA OF CREDIT SYNDICATION TO THE DEBT PROBLEMS IMPLICATIONS

This paper deals with the behaviour of commercial banks in the syndicated credits market, which proved to be the most popular instrument in the 1970s guiding credit flows to developing countries. The author argues that the distortions in the pricing structure of syndicated credits biased the international credit market towards overlending, thus making standard investment criteria less applicable to credit commitments to developing countries. The analysis of post‐1982 rescheduling qualifies it as a vicious circle and stresses the urgent need for the partial forgiveness of developing countries' debts in accordance with the market price of securitized debt.