The Depository Trust & Clearing Corporation (DTCC) said Tuesday it will launch Loan/SERV, a new and evolving suite of services to help automate and streamline the processing of syndicated commercial loans.
Syndicated loans are complex structures involving multiple lenders for each borrower, with an agent bank acting as the liaison, transmitting information back and forth between parties. The primary loan transactions can be made in multiple currencies, may include a combination of term and revolving loans, and are routinely traded in the secondary market.
The syndicated loan market continues to grow in both complexity and volume. According to industry estimates, global syndicated lending reached $4.5 trillion in 2007, up 13.4% from 2006 and a 32% increase over 2005.
Today, the loan process is essentially manual and information is faxed among market participants, said Christopher Childs, vice president, DTCC Product Manager for Syndicated Loans. This results in millions of faxes going out into the market each month. Add to this the exponential growth in loan trading volume in the secondary market and agents find themselves swamped in recordkeeping requirements. This can lead to manual errors, backlogs of unsettled trades and mistakes in payments to primary and secondary investors.
Loan/SERV will use the FpML (Financial products Markup Language) standard and DTCC will leverage existing technology to build the secure network for the syndicated loan market and incorporate the new standard messages to be established by the participating industry members. Messages will either be routed directly to lenders or they can obtain the information by accessing a Web-based message hub.