Reinvent Syndicated Lending with Corda

Corda Mar 28 2022 By: Ashutosh Meher




Reduce turnaround time with syndicated loan
Ashutosh Meher
Ashutosh Meher Senior Developer Evangelist
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The world is rapidly changing we are fast coming out with new and innovative ways to do things in a faster, more efficient, and cost-effective way. But, banking is yet lagging behind, hardly much has changed, we still take days and weeks to process financial transactions. Modern banking is still inefficient and costly. Why so and what can be done about it?

We need a way for stakeholders to communicate and exchange information in a streamlined way improving operational efficiency and thus reducing the overall turnaround time from weeks to days.

In this article, we will explore one such use case in the banking and financial service industry, the syndicated loan facility, and explore how Corda DLT could help to overcome the years-old issues that are costing billions of dollars every year.

In the last few years, DLT (Distributed Ledger Technology) and blockchain technology have disrupted multiple industries. DLT can provide a way to remove inefficiencies and suboptimal timeframes from the world of syndicated lending. By first forming a trusted network, like Corda, the syndicates can be formed faster than ever before. The result is money moving quicker, and projects getting off the ground at speed.

What is Syndicated Loan?

A syndicated loan is a facility in which financing is offered by a group of banks (referred to as the syndicate) to a borrower. The borrower could be a corporate, a large project, or a government. It generally involves a large sum of funds and helps lenders to spread the risk among themselves allowing them to participate in the lending opportunity which may be too large of an individual institution. One of the banks is referred to as the “lead bank”, takes the responsibility of coordinating the process of forming the syndicate and performing other administrative tasks. The other banks are generally referred to as “participant banks”.

Challenges in Syndicated Loans

While loan syndication is a very lucrative business proposition amounting to trillions of dollars in global volumes every year, it is plagued by various challenges and complexities. Some of the prominent challenges are mentioned below:

  • Slow Turn Around Time
  • Poor Document Management
  • Lack of Transparency Among Stakeholders
  • Long Settlement Cycle
  • Reconciliation Issues

The loan syndication process requires a significant amount of information sharing between various stakeholders. Stakeholders are different financial institutions that don’t have a common standard operating procedure and work on siloed systems that lead to a lack of transparency and operational efficiencies. The operational inefficiencies cause various reconciliation issues and result in longer settlement cycles. In addition, most of the process is still paper-based leading to poor document management and data inefficiency.

How Corda Could Help?

Distributed Ledgers like Corda could be a great solution to the problem faced in the syndicated loan market.

  • Corda helps to connect the siloed systems of the different stakeholders and allows them to work on a common platform, thus allowing them to establish a standardized process.
  • Assets could be registered on the Corda ledger providing proof of ownership and asset tracking throughout the lifecycle of the asset.
  • Every stakeholder sees the exact same copy of the data which improves transparency and trust, as well as gets rid of reconciliation issues.
  • Important documents can be uploaded as part of the transaction in a tamper-proof way allowing stakeholders to validate and perform due diligence in an efficient way.
  • Corda guarantees data immutability, what goes into the ledger is stored in an immutable way thus allowing easy audibility and fraud detection.

This is how Corda could help build a system that could benefit the stakeholders and solve the decades-long challenges faced by the syndicated lending players.

. . . .

You might be interested to take a look at a sample code on syndicated lending. It could help you get started and take advantage of the technology Corda offers.

I hope you liked this post; thank you very much for reading it.

Ashutosh Meher
Ashutosh Meher Ashutosh is a Developer Evangelist at R3, an enterprise blockchain software firm working with a global ecosystem of more than 350 participants across multiple industries from both the private and public sectors to develop on Corda, its open-source blockchain platform, Corda Enterprise, a commercial version of Corda for enterprise usage, and Conclave, a confidential computing platform. Follow Ashutosh on Twitter.

Reader Comment 1

  1. Connor Gillooly

    Thank you for sharing this great article, Ashutosh.

    I also believe that Corda is a beneficial technology for Commercial Banking. I am currently working on a project in the industry and I think Corda is brilliant because it integrates the two big “R”s – Relationships and Regulation.

    Both of these R words are especially important in Banking and Corda provides a brilliant solution. I look forward to sharing more as I develop my project.

    Thank you!

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