Loan Commitments and Facility Fees
Commercial banks in recent years have begun to reevaluate their policies toward loan commitments—agreements in which banks obligate themselves to lend, upon customer demand, up to specified dollar limits over predetermined future time periods. These reappraisals have been prompted in part by concern on the part of both bankers and the monetary authorities over the high activation rates and large dollar volumes of loans extended under outstanding commitments during periods of tight credit.
