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.