UK-based fintech firm Finastra announced on Thursday it has teamed up with R3 and seven banks to create an online marketplace to drive transparency and efficiency in the syndicated loan market. Finastra reported that R3’s distributed ledger technology (DLT) based platform, Fusion LenderComm exposes real-time credit agreement, 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.
The company noted the move will slash the operational cost and burden of agent to lender administration and deliver self-service capabilities to lenders, providing accurate information on demand to optimize loan portfolios. BNP Paribas, BNY Mellon, HSBC, ING and State Street have joined the global community, with real-time data already exchanged between agents and lenders in the pilot phase. Simon Paris, Deputy CEO of Finastra, explained:
“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. The community of banks already on board covers approximately 10% of the global syndicated lending market and demonstrates the appetite to make this market utility a success. As more participants join, we will quickly gain the critical mass to develop this into the leading marketplace for syndicated lending and loan trading.”
Ian Morris, Head of Product Management – Corporate & Syndicated Lending at Finastra, also commented:
“The sheer amount of manual effort that goes into information exchange in this market means that quickly accessing deal data, providing transparency into accruals, interest rates and fees, is a real challenge. DLT enables lenders to see a personalized view of positons across agent banks and reduces the operational risk involved in managing multiple participations. From day one, Fusion LenderComm will mean fewer emails and phone calls and an immutable record of transactions during the lifecycle of deals.”
Ivar Wiersma, Head of Innovation at ING Wholesale Banking, said:
“Exchange of information in the syndication lending market is predominantly done manually. 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.”
Robert Waddell, Global Lead of Syndicated Loan Products for State Street, added:
“Fusion LenderComm has the potential to solve a problem whose solution has eluded the loan market since inception: distribution of loan information in a structured, timely, transparent manner that comes directly from the content creators – the agent banks. As a consumer of large amounts of this information, the prospect of eliminating labor-intensive exercises, combined with the additional benefits of increasing efficiency, data accuracy and reducing operational risks, is not only very important for State Street, but all market participants and regulators as well.”
The Fusion LenderComm platform is expected to launch next year. The platform promises to be an open utility for all banks involved in syndicated lending, including users of Finastra’s FusionBanking Loan IQ and other loan servicing software. The long-term roadmap for the platform will transform the whole syndicated loan value chain, from book-running to delivering a marketplace for faster loan trading and settlement.