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DTCC launches Loan/Serv contract reconciliation service

29 October 2009  |  1086 views  |  0 Source: DTCC

The Depository Trust & Clearing Corporation (DTCC) today announced the launch of its Loan/SERV Contract Reconciliation Service which greatly enhances and expands reconcilement capabilities for the global syndicated loan market.

The Contract Reconciliation Service, in addition to enabling agent banks and lenders to reconcile loan positions on a daily basis, takes loan reconcilement to a more detailed level. It will provide market participants with information on interest rates, margin and fee calculations, drawn and unutilized balances, payment-in-kind balances and a host of other data that will further automate and streamline the processing of syndicated loans.

DTCC introduced its earlier Reconciliation Service in 2008, which enabled agent banks and lenders to view and reconcile loans at a total commitment balance level.

"Contract Reconciliation represents phase two of our Loan/SERV reconciliation process and provides 30 new data fields that help identify and correct processing errors before they lead to settlement problems," said Mathew Keshav Lewis, DTCC vice president, European Loans Product Management.

"The Loan/SERV Contract Reconciliation is the first and only global service that can provide reconcilement at all levels, from commitment and facility level down to the individual contracts, with all of the relevant transaction detail," said Lewis.

"One of the great benefits of Contract Reconciliation is that it will help agents and lenders correct errors in cash accruals and related cash flows before they become problems," said Lewis. "This brings major new efficiencies to the syndicated loan market by helping reduce profit and loss adjustments that come with processing errors, and eliminates the time and effort required for manual tracking and correcting of these errors. For example, market participants will be able to see upcoming interest payments so that if they see a problem or an error, they can correct it before the payment comes due."

Contract Reconciliation will be in full production with leading global banks, including J.P. Morgan, The Bank of New York Mellon, Barclays Capital, Citi, Deutsche Bank and The Royal Bank of Scotland iScotland in the next two months. Leading investment firms such as PIMCO, Oak Hill Advisers, Highland Capital Management and KKR will begin using Contract Reconciliation at the same time.

"This represents a major advance for the global syndicated loan market because participants have never before had this quality and volume of information available at their fingertips on a daily basis," said Lewis. "It will be especially valuable in Europe, where deals can be more complex with multiple borrowers, multiple currencies and a greater number of individual contracts. It will save countless hours in manual problem-solving and will move the market closer to straight-through processing."

DTCC's Reconciliation Service has been operating since September 2008 and currently has more than 1,545 investment funds managed by more than 100 fund managers linked to it. Loan/SERV customers will be able to choose the level they would like to reconcile loan processing and can continue to use the Reconciliation Service or move up to the Contract Reconciliation Service.

Loan/SERV also will offer cash settlement capabilities, including Delivery versus Payment (DVP), beginning in 2010. "Our multi-currency DVP service, coupled with the Loan/SERV Contract Reconciliation Service, will dramatically reduce risk and provide greater certainty in the syndicated loan market," said Lewis. "DVP will provide greater certainty to loan traders that cash settles simultaneously with changes to asset ownership recorded by agent banks."

Along with its Reconciliation Service, DTCC introduced its Loan/SERV Messaging Service in 2008, which provides a safe and automated network for the transmission, receipt and online storage of industry-standard loan messages.

Loan/SERV is a service offering of DTCC Loan/SERV LLC, a subsidiary of DTCC.

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