Syndicated loans worth billions of dollars are traded annually on global capital markets. The large scale of these loans necessitates the participation of a number of banks and financial institutions, resulting in increased liability and cost due to manual stakeholder coordination. Digitization and standardization enabled by blockchain provide solutions that are unique to the problems faced by the syndicated loan market.

For Agent Banks, Streamlined Issuance, Servicing, and Administration

The Conundrum

Syndicated loan execution and administration is inefficient and expensive, relying on a variety of intermediaries, bespoke proprietary solutions, and legacy systems. Most transactions are led by lead agent banks, responsible for KYC, record management, servicing, and payments for lenders and secondary agents. It takes a lot of labor to ensure that documentation work is done correctly, which takes time and increases the risk of human mistakes.

The Alternative

Digital standardization across lead agents, lenders, and secondary agents on Codefi Assets can drastically reduce the risk and manual effort required to facilitate critical components of a syndicated loan deal like KYC, record and document management, servicing, and payments. Data integrity, consistency, security, and cost savings are possible with a blockchain-based digital solution.

Amendment Voting by Computer

The Conundrum

In order to arrive at a final judgment on voting to change the provisions of a syndicated loan deal, human tracking and recording of stakeholder votes are required. Documents must be manually updated with new terms after a vote is passed to ensure consistency across all syndicates.

The Alternative

By automating both the gathering of votes and the update of documentation, Codefi Assets tackles two major issues with syndicated loan voting. Without a lot of manual work, amendment votes can be collected remotely and confirmed for accuracy. Furthermore, the results of a vote can trigger a series of smart contracts that execute the terms of a syndicated loan that are affected, with the added benefit of an immutable time-stamp that all parties can see and verify.

Banks drive ahead with blockchain project for syndicated loans market: Vendor Synaps Loans and… https://t.co/W7NT9nAIi2 #BlockChain #FinTech pic.twitter.com/vpdiqgpQKe

— Craig Brown, PhD (@craigbrownphd) March 30, 2017

Document Management and Security Have Been Improved

The Conundrum

Document management is a chronic issue in any industry with a large number of stakeholders. Many stakeholders have identical or nearly identical copies of documents, and verifying the “truth” requires collaborative trust and consensus, which can break down in larger or higher-stakes transactions. Data reconciliation takes a lot of time and effort, and it often necessitates the use of expensive lawyers and other third parties.

The Alternative

The document management solution from Codefi Assets ensures that stakeholders have access to the most recent version of a document as well as an immutable history of previous versions. Its “single source of truth” solution cuts down on the time and cost of data reconciliation between stakeholders and the need for lawyers or third parties.

Also, read – How Blockchain Could Boost The Electric Vehicle Charging Infrastructure

Clearing and Settlement in Near-Real-Time

The Conundrum

Settlement times in the current syndicated loan market can exceed 20 days, posing significant risk and exposure to the entities that make up a loan syndicate. As a result, these businesses must bear the risk and liability associated with the time gap between delivery and payment. The result is higher fees and lower profitability across the board.

The Alternative

Syndicated loans built on blockchain technology enable near-real-time settlement, substantially removing the inefficiencies, risk, and expenses associated with extended settlement times in today’s sector. ConsenSys Codefi enables these settlement solutions by securely digitizing and tokenizing assets, accelerating funds transfers, and thus optimizing syndicated loan settlements.