A group of banks led by Credit Suisse aims to launch a Blockchain technology-based commercial platform for syndicated loans in 2018, according to Euromoney.
According to Emmanuel Aidoo, Credit Suisse’s Blockchain project head, the group is moving ahead with the next phase of the project. The initiative’s second stage of trial was completed in March 2017.
“We are working to put a few dozen smaller loan transactions, where we or other participating banks are the agent, onto a distributed ledger platform using smart contracts in production next year.”
Highlights of the second phase trial
The second phase of the trial for the Blockchain proof-of-concept was participated in by several financial institutions.
The pilot run envisioned a syndicated loan market in which multiple lenders pool their resources for individual borrowers. Among the participating banks included the Royal Bank of Scotland, State Street Corp., Scotiabank, Societe Generale, Barclays, BBVA, Danske Bank, and Wells Fargo.
The buy-side firms that took part in the test included AllianceBernstein, Eaton Vance Management, and Oak Hill Advisors. The trial was managed by the research unit of distributed ledger technology startup firm R3.
Possible benefits of the platform
The bank group hopes that the platform could lessen the barriers between counterparts to reduce both the time and cost that are spent to make the necessary capital available.
According to Aidoo, the platform’s use of smart contracts to lessen turnaround times could be effective in attracting potential lenders and investors to the market.
“Many investors, including mutual funds and institutional asset managers, might be attracted to loans that are senior to bonds in the capital structure, but they are put off by how long loan trades take to settle.”