Blockchain Demonstration Shows Potential Loan Market Improvements09.28.2016 By John D'Antona Editor, Traders Magazine
Credit Suisse.com – Credit Suisse, Ipreo, Symbiont and R3 announced the successful initial stage completion of a project to demonstrate how blockchain technology can be used to improve the syndicated loan market. The proof of concept will continue through the end of the year and includes participation from a number of agent banks, service providers and fund managers.
The project was arranged by Credit Suisse, is being managed by R3 in its Lab and Research Center, and utilizes technology solutions from Synaps Loans LLC, a recently formed partnership combining Symbiont’s leading smart contract technology with Ipreo’s new business process solution to speed loan trade settlement. Participants who collaborated and brought important market knowledge, process experience and testing resources to the project include R3 consortium members BBVA, Danske Bank, Royal Bank of Scotland, Scotiabank, Société Générale, State Street, U.S. Bank and Wells Fargo. Influential buy-side firms AllianceBernstein (AB), Eaton Vance Management, KKR and Oak Hill Advisors are also involved in the initiative.
“This project demonstrates the potential for blockchain technology to fundamentally reshape the syndicated loan market and the capital markets more broadly,” said Emmanuel Aidoo, head of the distributed ledger and blockchain effort at Credit Suisse. “This demonstration sets us on a path to increase efficiency and reduce costs, which will benefit banks and clients alike. By connecting a network of agent banks through blockchain, we can achieve faster and more certain settlements in the loan market.”
“We are demonstrating that distributed ledger technology can be put to work now,” said Joseph Salerno, a Managing Director at Ipreo and CEO of Synaps Loans LLC. “Our solution addresses actual use cases and meets production standards for maintainability, security, privacy and throughput.”
“Smart contracts can revolutionize the entire lifecycle of a loan, from creation to settlement in secondary market trading, ” said Mark Smith, CEO and Co-founder of Symbiont. “The payoff isn’t just cost savings, but the potential to create entirely new business opportunities for financial institutions.”
“Our goal at R3 LRC is to act as a center of gravity for financial institutions, innovative technology companies and progressive regulators, and collaborate in the research, development and commercialization of distributed ledger technology for financial markets,” said Tim Grant, CEO of R3’s Lab and Research Center. “This partnership with R3 members, non-members and Synaps has gone a long way in demonstrating that distributed ledger technology can significantly benefit the syndicated loans market.”
“Blockchain has the potential to change the loan issuance and servicing lifecycle,” said Antoine Shagoury, Executive Vice President and Global Chief Information Officer, State Street. “Pursuing new opportunities through testing and development is an important aspect of our digital strategy. We know, however, that many of the true desired benefits of Blockchain, for this application and others which require network participation, can only be achieved through industry collaboration and so we are thrilled by the prospect of playing a role in taking this proof of concept into the pilot phase with our industry peers.”
“There’s been a lot of hype around how distributed ledgers will drive efficiencies in the syndicated loan space,” said Robert Berk, Senior Vice President and Chief Operating Officer, U.S. Bank Capital Markets. “We’re excited to prove the technology works with players throughout the loan ecosystem to truly understand its value.”
Through Synaps, loan investors have direct access to an authoritative system of record for syndicated loan data. This yields immediate savings by reducing manual reviews, data re-entry and systems reconciliation. In the future, loan data processing can be done exclusively on the distributed ledger, eliminating the cost for each market participant to maintain its own separate lending system.
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