Euroclear Bank has said that it would launch multi-currency, delivery-versus-payment (DvP) settlement service, LoanReach, for secondary market trades in syndicated loans in the first quarter of 2010. DvP settlement is the industry standard for trades in most other asset classes, such as equities and bonds. According to Euroclear Bank, automated DvP settlement service fills gap in the syndicated loan business, reducing costs and risks for secondary market loan trading.
Euroclear Bank’s initiative aims to significantly shorten the length of the settlement cycle. It targets the benchmarks set by the Loan Market Association (LMA) and the Loan Syndications and Trading Association (LSTA) of T+10 and T+7, respectively, for conventional trades. Euroclear Bank claimed that the LoanReach service will eliminate most of the credit and settlement risks, and reduce the counterparty risks, associated with the settlement of syndicated loans and increase liquidity.
Jurgen De Weghe, director of LoanReach product management, said: “We are proud to deliver the benefits of automation and standardisation to syndicated loan investors. In close collaboration with agent banks, the introduction of multi-currency trade matching and DvP settlement is critical in this cost- and risk-conscious environment.
“Euroclear Bank’s LoanReach service is the most comprehensive in the market, with more features, such as E-messaging and collateral management, to come in the near future.”
Martin Lelong, project director at Societe Generale Corporate & Investment Banking (SGCIB), said: “We strongly support the development of market platforms for syndicated loans. We are particularly interested by Euroclear’s announcement, as their service offer fits very well with the specificities of the European market, which is of key importance to us: a tool working seamlessly and with all major currencies from trade matching to final settlement.
“We are convinced that these types of solutions will bring operational risk reductions, increased liquidity and productivity gains to the whole sector.”
