by Edward C. Kelleher
The syndicated loan market remains hampered by manual processes, outdated communications and an absence of industry-wide processing standards. If these trends persist, the cost and risk of processing loans will increase and syndicated loan processing will grow increasingly antiquated relative to the broader industry."
That, in a nutshell, is why the leading agent banks turned to DTCC in 2007 to develop a solution for processing syndicated loans, Chris Childs, DTCC vice president, Global Loans Product Management, told a group of leading financial and trade journalists at a press briefing at DTCC’s New York headquarters in May.
DTCC organized the briefing in response to increased media interest in the global syndicated loan market. "We are receiving a growing number of inquiries from journalists in both the U.S. and Europe about the syndicated loan market," said Patrick Kirby, DTCC managing director, Asset Services. "We find that many reporters are unfamiliar with DTCC’s role in bringing greater efficiency to this market, so we decided it was an opportune time to brief the people who cover syndicated loans about the market in general and the services we offer."
– Marc Romain, managing director, Barclays Capital
– Nigel Pavey, managing director, Barclays Capital
At the table…and on the line
More than 15 journalists in both the U.S. and Europe from major publications and news services attended the meeting. Reporters from the Financial Times, Bloomberg News, Securities Industry News, Thomson Reuters, Euroweek, Wall Street Letter, Global Custodian and Reuters London were present, and several European publications participated via teleconference for the 90-minute discussion.
Kirby provided an overview of DTCC at the start of the briefing. Childs, along with Mathew Keshav Lewis, DTCC vice president, European Loans Product Management, updated reporters on developments in the market and DTCC’s Loan/SERV suite of products.
Two London-based bankers from Barclays Capital, which has worked with DTCC as a member of its Loan/SERV advisory committee since the launch of these services in 2008, participated via videoconference. Marc Romain and Nigel Pavey, both managing directors at Barclays Capital, spoke about the growth opportunities that come with automating and streamlining the syndicated loan market.
Pavey noted that operation aspects of the syndicated loan market are a significant focus for the business. He added that achieving greater automation, efficiency and scalability was important as market volumes, transaction scale and the number of participants increase over time.
Romain said that position reconcilement and settlement efficiency remain major concerns in the European loan market; it can take more than 40 days for a loan to settle in Europe. He said the infrastructure that agent banks and DTCC are developing for the syndicated loan market would boost settlement efficiency and reduce risk at the same time.
Details on the service
Lewis described the evolution of the Loan/SERV reconciliation services. The first version of the service, launched in 2008, enabled agent banks and lenders to view and reconcile loans at a total commitment level. The enhanced Contract Reconcil-iation service, launched in 2009, provides reconcilement at all levels, from commitment and facility level down to the individual contracts.
Loan/SERV Messaging Service, which provides a safe and automated network for the transmission, receipt and online storage of industry-standard loan messages, is in pilot with Barclays Capital and JPMorgan and a group of major investment firms, according to Lewis. He said more banks and funds will begin using the Messaging Service shortly.
A third Loan/SERV offering, Cash on Transfer, will provide delivery-versus-payment for the market, providing certainty for loan traders that cash settles simultaneously with changes to asset ownership recorded by agent banks. The service will begin testing later this year, according to Lewis. @