The Depository Trust & Clearing Corporation (DTCC) today announced the launch of its Loan/SERV Messaging Service that will provide a secure and automated network for the transmission of standard loan messages between agent banks and lenders in the syndicated loan market.
The global Messaging Service is the second in a suite of DTCC products that will make Loan/SERV a comprehensive, integrated solution for the syndicated loan market.
Currently, loan information is faxed back and forth between agent banks and lenders, leading to errors caused by manual processing. The Messaging Service takes widely-used loan information, such as interest and principal payments, rate resets, drawdown notices and ongoing fee payments, and provides a secure and automated network for the transmission, receipt and online storage of these loan messages.
The global standard loan messages have been developed by The Loan Syndications and Trading Association (LSTA) in the United States in cooperation with The Loan Market Association (LMA) in Europe.
"We're delighted that DTCC has incorporated the industry's standard loan messages into its new service," said Bram Smith, interim executive director of the LSTA. "The messages will go a long way to boosting efficiencies and reducing communication errors in loan processing. The standards will give banks and lenders greater control over their communications and improve the reliability and timeliness of their communications in both the primary and secondary markets. We hope that all market participants will begin using the standard messages."
"The standard loan messages and the Loan/SERV Messaging Service employ FpMLTM, the industry-standardized e-commerce language that the LSTA has worked to advance for the benefit of the global market," said Christopher Childs, DTCC vice president, Global Loans Product Management. "FpML has already proven itself in the over-the-counter derivative-trading markets, where it combines speed, accuracy and security to provide an effective communication vehicle."
The Messaging Service will employ DTCC's proprietary SMART (Securely Managed and Reliable Technology) network to transmit and receive messages, but customers will have the added flexibibility of using other communications networks such as SWIFT, Childs said.
Lenders and institutions that do not want to receive electronic messages directly into their processing systems are able to log on to a Loan/SERV messaging hub via a Web browser to view and process their messages.
DTCC launched its Loan/SERV Reconciliation Service in the United States in September 2008 and in Europe in November 2008. The Reconciliation Service automates the processing of syndicated commercial loans by enabling agent banks and lenders to view and reconcile loan positions on a daily basis.
Both the Reconciliation and the Messaging Services are the only services that process syndicated loan information on a global basis.
"DTCC is focused on providing a global solution that works in Europe, North America, Asia and other markets. We need a solution to serve the increasingly global base involved in syndicated loans," said Childs.
Leading agent banks such as Citi and Deutsche Bank are already using the Reconciliation Service and JP Morgan will begin using it in the first quarter of 2009. DTCC will continue to work with its advisory committee of leading global banks - The Bank of New York Mellon, Barclays Capital, Citi, Deutsche Bank and The Royal Bank of Scotland - in developing Loan/SERV.
DTCC's European consultation group for Loan/SERV includes more than a dozen members from across the agent, custodian/trustee and buy-side communities, including Barclays Capital, Blue Bay, Cheyne Capital, Citi, CQS, Deutsche Bank, European Credit Management and The Royal Bank of Scotland.