Explain the two ways in which a bank can sell its position in a syndicated loan

What will be an ideal response?

A syndicated loan is arranged by either a bank or a securities house. The arranger then lines up the syndicate of banks with each bank providing the funds for which it has committed. The banks in the syndicate have the subsequent right to sell or distribute its position in the loan to other banks. The two methods of distribution are assignment or participation. These methods are described below.
For the method of assignment, the holder of a loan who wants to sell its position can do so by passing on or assigning its interest in the loan. In this procedure, the seller transfers all rights completely to the holder of the assignment, now called the assignee. The assignee is said to have privity of contract with the borrower. Because of the clear path between the borrower and assignee, assignment is the more desirable choice of transfer and ownership.

For the method of participation, the owner of a loan "participates out" a portion of its holdings. The holder of the participation does not become a party to the loan agreement and has a relationship not with the borrower but with the seller of the participation. Unlike an assignment, a participation does not confer privity of contract on the holder of the participation, although the holder of the participation has the right to vote on certain legal matters concerning amendments to the loan agreement. These matters include changes regarding maturity, interest rate, and issues concerning the loan collateral. Because syndicated loans can be sold in this manner, they are marketable.