Limited M&A activity has reduced corporate lending significantly, bringing favourable pricing, longer tenors, reduced fees and relaxed covenants. Loan volumes in the UK have fallen by 8% on last year, and transaction numbers are at an eight-year low. Cyclical data indicates that the loans market will see low prices for at least another year, benefiting corporates looking for refinancings and M&A facilities. Banks lending decisions are based on overall returns and credit quality with the capital adequacy provisions of Basel II – due to be fully implemented by 2007 – also making an impact. A corporate’s credit rating will be imperative to those banks compliant with Basel II at a basic level. Although figures for the UK, French and German syndicated loan markets indicate convergence in pricing, loan volumes increased by 41% in France and 71% in Germany during the first half of this year. The trend on the continent is towards syndicated facilities with smaller bank commitments to individual borrowers.