What does yank the bank mean?

It is market slang for a borrower's contractual right to remove a lender from a syndicated or club loan by making it transfer its share to a replacement. The usual cases are a lender that refuses an amendment needing everyone's consent after the required majority has agreed, a lender that claims extra tax or cost payments, and a lender that fails to fund. The lender is paid what it is owed and leaves; the facility carries on with the replacement in its place.

Does a replaced lender get a premium?

Not usually. The transfer is priced at par: principal outstanding, interest and fees accrued to the transfer date, and break costs if the transfer falls inside an interest period. A premium is payable only if the agreement provides for one. A lender replaced after claiming a tax or increased-costs payment typically keeps its right to amounts already accrued under those clauses, even though it gives up its loans and commitments.

What is a non-consenting lender?

A lender that refuses, or fails to agree to, an amendment or waiver that needs the consent of all lenders, or of every affected lender, at a time when the required majority has already agreed. The definition matters because the replacement right usually reaches only that lender. A lender that votes against a change the majority can approve without it is not non-consenting in this sense, because its vote does not block anything.

Can a borrower replace the agent bank under the clause?

Not usually through this clause. It replaces a lender in its capacity as lender. If the agent also holds a share, that share may be transferred, but the agency role is governed by separate provisions on the agent's resignation and replacement, which often give the majority lenders, rather than the borrower, the right to appoint a successor. Many agreements also exclude the agent or security trustee from the replacement right expressly.

// WORKED EXAMPLEHOW THE CLAUSE WORKS

Yank-the-Bank Clause: How a Borrower Replaces a Lender

One lender says no, three say yes. The clause sets the price of no.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07

// THE SHORT ANSWER

When most of a syndicate agrees to an amendment and one lender refuses, the yank-the-bank clause decides what happens next. Voting rules alone would leave the stalemate in place, because some changes need every lender. The clause gives the borrower a way round it: the borrower finds someone to take over the refusing lender's share, and that lender must sell for what it is owed, with no premium for its vote. In effect a veto becomes a price. The borrower pays that price, or finds a lender who will, which is why the clause shapes the negotiation as much as the transfer.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 04 — Highview Industries. Same request as Issue 01 on the surface. A completely different file underneath. Your call first, then the senior banker's.

Read the file →

// 01 — WHY A SYNDICATE NEEDS A WAY PAST ONE LENDER

A syndicated or club agreement decides most questions by a vote of the majority lenders. A short list is reserved for every lender, because each touches a lender's own money: extending the final maturity, cutting the margin, reducing what is owed, changing how payments are shared, and often releasing a guarantor or security. Protecting each lender's economics this way also hands each lender a veto.

Most of the time the veto is not used against the group. Sometimes it is. A lender may have changed its view of the borrower's sector, be shrinking its book in that market, or see a chance to ask for a larger fee than the others accepted. Without a replacement right, the borrower has two choices: live without the change, or refinance the whole facility to remove one participant.

The same clause, or a companion clause beside it, usually reaches two other cases where one lender costs the borrower something the rest do not. A lender that claims a tax gross-up or an increased-costs payment is charging the borrower for its own circumstances. A lender that does not fund its share when asked, or becomes insolvent, leaves a hole in a commitment the borrower is relying on. In each case the agreement lets the borrower pay that lender out and move on.

// 02 — HOW THE REPLACEMENT WORKS

The borrower gives notice to the lender and to the agent, and the lender must transfer all of its rights and obligations, its loans and its undrawn commitments, to a replacement. Where the lender has failed to fund, some forms let the borrower move only its undrawn commitments or only the revolving facility. The replacement can be another lender already in the syndicate or a new institution that meets the agreement's transfer conditions. Finding it is the borrower's job; neither the agent nor the departing lender is obliged to help. Who bears the agent's transfer fee and the costs depends on the drafting.

Transfer price = principal outstanding

+ accrued interest and fees

+ break costs and other amounts due

Premium for the vote = nil, unless the agreement provides one

Where the trigger is a refused amendment, documents commonly add conditions: the required majority must already have consented, the replacement must itself consent to the change, and the right must be used within a set period after the refusal. Some agreements cap the share of total commitments that may be replaced, or carve out the agent. Which triggers the clause carries, and how far it reaches, is negotiated deal by deal; nothing in New Zealand, Australian or UK law supplies it.

// 03 — THE EXAMPLE

A group of veterinary clinics, constructed for this page, borrows from a club of four lenders: a US$60m term loan and a US$20m revolving facility, each lender holding a quarter (US$15m of term loan and US$5m of revolver). Fourteen months before maturity the group asks for a two-year extension on the same margin, with an extension fee. Under its agreement an extension needs every lender. Three agree. The fourth, reducing its exposure to the sector, declines.

The agreement lets the borrower replace a non-consenting lender once lenders holding at least two-thirds of total commitments have agreed. That threshold is the example's, not a market norm.

Commitments agreeing: 3 × 20 = 60 of 80 = 75% (example needs at least 66⅔%)

Paid to the refusing lender on transfer:

Term loan outstanding 15.00

Revolver drawn 3.00

Accrued interest and fees 0.21

Break costs, mid interest period 0.04

Total, US$m 18.25

Undrawn revolver commitment taken over 2.00 (no cash changes hands)

One of the consenting lenders takes US$10m of the US$20m commitment and a new lender takes the other US$10m, and both sign up to the extension. The extension then has every remaining lender's agreement and takes effect. The departing lender receives par and its costs, nothing for the vote it held.

The step that decides the outcome is not in the clause. It is whether anyone will take the share. If no lender wants another US$20m of the sector at that margin, the right exists but cannot be used, and the borrower is back to a wider refinancing or a higher price. Some agreements soften this by letting an extension apply only to the lenders that agree, with the refuser repaid on the original date.

// 04 — HOW IT DIFFERS FROM SNOOZE-AND-LOSE

The clause is often confused with two other ways a facility agreement deals with an awkward lender. A snooze-and-lose provision deals with silence: a lender that does not answer a consent request within the stated time is left out of the count. It removes a vote, not a lender, and some agreements carve the all-lender matters out of it. Disenfranchisement deals with default: a lender in default on its funding loses its vote on its undrawn commitment but stays in the syndicate.

Replacement deals with an active refusal, or a lender whose costs or failure have become the borrower's problem, and removes the lender altogether. It also differs from a lender's own decision to sell. A lender that chooses to leave sells at whatever the market pays, which can be below par; a lender that is replaced is paid the price the clause sets, which is usually par.

DEFINED IN ONE PARAGRAPH → · MAJORITY LENDERS → · THE SYNDICATED LOAN →

// 05 — WHERE IT DECIDES A FILE

A lender reads the clause when it joins. It means the veto on reserved matters can be bought out at par, so a credit committee that approved a five-year hold should know the exposure may be ended early on the borrower's terms. For the lenders that agree, replacement is a new decision: taking a larger share means a larger hold, a fresh approval and a check against the bank's own limits for the borrower and the sector.

For the borrower the useful question is what the refusal says. A lender leaving a sector may be early rather than wrong, and the others will be asked the same question at the next renewal. The clause solves the vote. It does not solve the view behind it.

BANK LAWYERS AND LOAN DOCUMENTS → · REFINANCING A BUSINESS LOAN → · THE CLUB FACILITY →

// QUESTIONS PEOPLE ASK

What does yank the bank mean?: It is market slang for a borrower's contractual right to remove a lender from a syndicated or club loan by making it transfer its share to a replacement. The usual cases are a lender that refuses an amendment needing everyone's consent after the required majority has agreed, a lender that claims extra tax or cost payments, and a lender that fails to fund. The lender is paid what it is owed and leaves; the facility carries on with the replacement in its place.
Does a replaced lender get a premium?: Not usually. The transfer is priced at par: principal outstanding, interest and fees accrued to the transfer date, and break costs if the transfer falls inside an interest period. A premium is payable only if the agreement provides for one. A lender replaced after claiming a tax or increased-costs payment typically keeps its right to amounts already accrued under those clauses, even though it gives up its loans and commitments.
What is a non-consenting lender?: A lender that refuses, or fails to agree to, an amendment or waiver that needs the consent of all lenders, or of every affected lender, at a time when the required majority has already agreed. The definition matters because the replacement right usually reaches only that lender. A lender that votes against a change the majority can approve without it is not non-consenting in this sense, because its vote does not block anything.
Can a borrower replace the agent bank under the clause?: Not usually through this clause. It replaces a lender in its capacity as lender. If the agent also holds a share, that share may be transferred, but the agency role is governed by separate provisions on the agent's resignation and replacement, which often give the majority lenders, rather than the borrower, the right to appoint a successor. Many agreements also exclude the agent or security trustee from the replacement right expressly.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE FIRST QUESTION · THE LOAN · PROTECTION

A wholesaler's stock is the bank's main security. Its main supplier's terms say goods remain the supplier's property until they are paid for.

What does that clause do to the bank's security?

7 MORE ON THE LOAN · PROTECTION →WHERE DO YOU READ FROM? THE PLACEMENT →

THE GLOSSARYIN ONE PARAGRAPHYank-the-bank clause (replacement of lender) What is a yank-the-bank clause in a syndicated loan?