Seven banks, including BNP Paribas, HSBC, ING, BNY Mellon and State Street, have joined forces with R3 and Finastra to develop a blockchain-powered marketplace for syndicated loans. The first pilots have already been successfully completed.
With the early support of seven global banks (two of which do not yet wish to be named), the platform will cover 10% of the syndicated loan market when live next year.
The aim of the new platform, which is called Fusion LenderComm, is to drive transparency and efficiency in the syndicated loan market by improving the data sharing between agent and lenders.
It will expose real-time credit agreements, accrual balances, position information and detailed transaction data to lenders, directly from agent bank loan servicing platforms such as Finastra’s Fusion Banking Loan IQ.
According to Ian Morris, head of product management, corporate and syndicated lending at Finastra, the company started development of the platform early this year and the first set of pilots on the current prototype concluded in August. The intention is now to push the platform into production and make it available to users next year.
“More pilots are planned in the coming month. Development sprints continue towards the final objective of go-live next year,” Morris tells GTR, adding that the parties welcome more lenders and agent banks to join the platform.
For now, the platform is merely designed for participants to view data, but it will be expanded at a later state, Morris explains.
“The initial release will allow participants to view their data, but the goal for future releases will enable the exchange of information between agents and lenders and ultimately include smart contracts,” he says.
The immutable ledger will maintain all transaction history, giving every lender a personal view of deals they participate in and a time-stamped audit trail. In a statement, the parties say the platform will slash the operational cost and burden of agent-to-lender administration and provide accurate information to lenders on demand to optimise loan portfolios.
The fact that the collaboration has already attracted approximately 10% of the global syndicated lending market “demonstrates the appetite to make this market utility a success,” says Simon Paris, deputy CEO at Finastra.
“As more participants join, we will quickly gain the critical mass to develop this into the leading marketplace for syndicated lending and loan trading,” he says. “No more will lenders find themselves an underserved part of the syndicated loan value chain. Where they have struggled with a lack of transparency and speed in accessing critical deal positions, Fusion LenderComm opens up new data plains beyond position reconciliation.”
Today, the exchange of information in the syndicated lending market is predominantly done manually, explains Ivar Wiersma, ING’s head of innovation. “This means that accessing deal data, including transparency into accruals and interest rates, can be a time-consuming process. The initial focus of Fusion LenderComm is to automate the predominantly manual process of information sharing and to offer better insight in deal data. Further along the line, Fusion LenderComm will ensure a further increase in speed and cost reductions which may lead to smaller participations in syndicated deals and new investment opportunities for our clients.”
Fusion LenderComm will be underpinned by R3’s Corda platform, which R3 describes as “blockchain inspired”. Just this week, the company launched Corda version 1.0, pushing blockchain technology one step closer to production.
So far, most blockchain applications announced in the trade finance space have been powered by a competing framework, Hyperledger Fabric, backed by Linux open source technology. The Digital Trade Chain consortium and UBS’s Batavia platform are just two of many projects utilising this framework, both built by IBM.
But it seems that R3 is now catching up, having launched a range of new projects in the last couple of months. This includes a partnership with TradeIX to develop an open account trade finance platform as well as one for the processing of sight letters of credit.
In an interview with GTR on the launch of Corda 1.0, R3’s CTO Richard Brown argued that the roadmap for large-scale deployment is now clear and that it is time for developers and entities “to make their choice”.
“The whole idea of these platforms is to allow the users to reduce their costs and share data with privacy with their peers. If lots and lots of incompatible platforms get deployed it doesn’t work,” he said.