Today Finastra announced that BNP Paribas, Natixis, Societe Generale have joined Natwest as customers of its Fusion LenderComm platform. The blockchain network enables the sharing of information about syndicated loans, a market with $3.5 trillion of loans brokered in 2017.
In the case of syndicated loans, the agent bank usually manages the information relating to the share of money from syndicate banks including for drawdowns and repayments of revolving credits. The agent bank often communicates data to the syndicate via email or fax, and that’s done monthly at best. Hence it involves a lot of reconciliations and blackout periods when up-to-date data might be unavailable.
A permissioned distributed ledger, using R3’s Corda Enterprise means agent banks can share credit agreements, accrual balances, and position data with lenders in real time, directly integrated with the lending banks.
Nowadays that data is usually managed by the agent on loan servicing platforms such as Finastra’s Fusion Loan IQ. The Fusion Lendercomm blockchain enables direct integration with Fusion Loan IQ and potentially other loan platforms that store the data. The Fusion Loan IQ product services nearly half the world’s syndicated loans for 75 financial institutions.
“This is an historic step that brings leading global banks together on the platform in the live Fusion LenderComm environment, for seamless and secure information exchange,” said Grant Jones, VP, Fusion LenderComm, Finastra. “But more than that, this is an important inflection point, paving the way for the whole industry to come on board, achieving even further critical mass.”
Apart from the automation benefits, Finastra has plans to create a secondary trading marketplace for syndicated loans, hence critical mass is essential.
“Given Natixis’ high involvement in the lending space we have been very supportive of the Fusion LenderComm initiative since day one,” said Frédéric Dalibard, Head of Digital for Corporate & Investment Banking at Natixis and R3 Chairman. “R3’s Corda is the perfect technology to enable the sharing of information between agents and lenders on a need-to-know basis while being fully compliant with our stringent IT security policies.”
While Finastra launched the very first R3 CorDapp, there is increasing blockchain activity in the syndicated loan space. Standard Chartered is working with Brazilian bank Itaú Unibanco for loans syndicated to a smaller group, so-called club loans.
U.S. startup Symbiont is building a syndicated loans platform with Ipreo part of IHS Markit. And BBVA has been developing a solution to support many types of loans, including issuing syndicated loans. Six months ago BBVA granted a €150 million to the Spanish electricity grid Red Electrica, syndicated to MUFG and BNP Paribas.