The Depository Trust & Clearing Corporation (DTCC) has launched Loan/SERV contract reconciliation service, to improve and expand reconcilement capabilities for the global syndicated loan market.
DTCC said that 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 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 added that the contract reconciliation will be in full production with banks that include JP Morgan, The Bank of New York Mellon, Barclays Capital, Citi, Deutsche Bank and The Royal Bank of Scotland in the next few months. Moreover, investment firms such as PIMCO, Oak Hill Advisers, Highland Capital Management and KKR will begin using contract reconciliation at the same time.
Mathew Keshav Lewis, vice president of European loans product management at DTCC, said: “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.
“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. 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.
“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. DVP will provide greater certainty to loan traders that cash settles simultaneously with changes to asset ownership recorded by agent banks.”
Marc Romain, managing director at Barclays Capital, said: “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. 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.”
