Geopolitical risk and the cost of bank loans

•Geopolitical risk increases the cost of bank loans.•Geopolitical risk is associated with not only higher loan prices but also more stringent nonprice loan terms and higher loan fees.•The effects of geopolitical acts on loan prices and nonprice loan terms are more pronounced than those of geopolitical threats. We examine the relation between geopolitical risk and the cost of bank loans using a sample of 31,004 loan facilities in the US over the period 1991–2019. We show that geopolitical risk is associated with higher loan prices and more stringent nonprice loan terms. With one standard deviation increase in the geopolitical risk index, the average cost of bank loans increases by 7.253 basis points. Delving into the components of geopolitical risk, we find that the effects of geopolitical acts on the cost of bank loans and nonprice loan terms are more pronounced than those of geopolitical threats.