NatWest to Become First Bank to Utilize R3 Corda Blockchain for Syndicated Lending
NatWest Announces Intentions to Become First Bank to Utilize Blockchain for Loans
In a press release on October 18th, NatWest announced their intention to make some big changes to their bank, hoping to be a catalyst for progress in the financial and crypto industries as well. They now have the infrastructure in place to use a blockchain-based platform, which “aims to dramatically transform and streamline the global syndicated loans market.” This platform will be launched by November 2018, according to the press release.
Syndicated loans accounted for £3.5 trillion in brokered deals around the world last year. The press release explains exactly what this type of loan does, saying that it occurs when “the size and risk of a loan cannot be accepted by a single lender and a ‘syndicate’ of two or more lenders is required to spread the risk.” The loans themselves are common, but an issue that has been constant is the lack of update to the technology that supports them, making them costly, inefficient, and dependent on the manual processing of each one.
With the advancements and the transparency of blockchain technology, the concept of bringing it to the traditional financial sector is almost natural, especially for syndicated loans. To make it possible to create this platform, NatWest will be using Fusion LenderComm.
As reported by TheNextWeb,
“The platform was built by Finastra in an attempt to improve communication channels between the many stakeholders of syndicated loans. Current systems are labor intensive and haven’t changed much in the last 20 years.”
Fusion LenderComm uses the distributed ledger technology from Corda’s R3 startup. The startup itself is meant to provide DLT solutions that impact both banks and tech firms. It lets different companies establish private DLTs and has been doing so for the last two years in the financial industry. They’ve even become a part of multiple partnerships with big names in the industry, like Microsoft and J.P. Morgan.
David E. Rutter, the CEO of R3, explained,
“The syndicated lending industry relies on costly, manually-intensive processes, making it ripe for innovation with blockchain technology. Fusion LenderComm, powered by Corda, has been proven to address these issues. The solution delivers immediate efficiencies and reduces costs for both agent banks and lenders. We have enjoyed working closely with NatWest and Finastra along with the many other leading institutions involved in this project. Now the focus shifts to the next phase as together we bring Fusion LenderComm into production.”
Part of the purpose of bringing in this type of technology is to make the process less time consuming. The press release says,
“The platform aims to dramatically reduce the amount of time taken to set-up syndicated loan arrangements for our customers – currently complex arrangements can take months to finalize. It also aims to achieve significant reductions in the ongoing cost of administration for lenders and a massive improvement in transparency.”
A statement from Trish Arksey, NatWest’s Lending Programme Director, said,
“We are excited about the possibilities that this platform offers to transform the syndicated loan market. We are investing in cutting-edge technologies and working with our suppliers and partners to deliver first class customer service and efficiency to a market that has not changed significantly in the last 20 years.”
At Finastra, VP Grant Jones said,
“NatWest will now be able to specify and publish lender-specific deal information to Fusion LenderComm in real-time, while its lenders can view this data which was previously only periodically provided by fax from agents or through telephone or email queries from lenders. This not only brings improved operational efficiency for NatWest and its lenders, but it also brings much needed transparency to the syndicated loan market.”
Even though there are some people that see this decision as a positive push towards progress, The NextWeb had commented,
“Yet again it’s a promise of blockchain laced with irony. It’s blockchain, but it’s closed off, hidden from public view, and centralized, in a bank.”