NatWest Bank to Adopt Blockchain Technology for Syndicated Loans
United Kingdom’s major commercial bank, National Westminster Bank (NatWest) has recently announced that it is going to integrate blockchain technology to effectively streamline communication between agent banks and lenders in the syndicated loan market.
NatWest Bank is one of the major commercial and retail banks in the United Kingdom. The bank is considered as one of the big four clearing banks in the United Kingdom. NatWest bank has a vast network of over 960 branches and 3,400 cash machines. The bank has 850,000 small business accounts and 7.5 million personal customers.
NatWest is going to leverage Finastra’s Fusion LenderCoom the blockchain platform underpinned by Corda, R3’s distributed ledger technology. The bank is planning to set the new platform live in next month.
According to a recent report, syndicated loans worth 3.5 trillion pounds were brokered all over the world. A syndicated loan is a loan which is offered by a group of lenders who work together to provide funds to a single borrower. A loan is syndicated when the size and risk of the loan cannot be accepted by an individual lender. In this condition, two or more lenders are required to minimize the possibility of risk. For syndicated loans, the borrower could be a large project, a corporation, or sovereignty such as government.
In the complex syndicated loans, hundreds of lenders involved and the current support system is inefficient. The process followed by syndicated loans is still manual which causes inefficiencies and increases the cost of operations. Introduction of blockchain technology will improve the efficiencies and reduce the cost of operations. The main goal of implementing blockchain technology is to cut time to set up syndicated loan arrangements for customers and making the process cost-effective. The blockchain based platform will not only reduce the time taken to set up syndicated loans arrangements and the cost of administration for lenders but also will improve transparency.
The Chief Executive Officer of R3, David E. Rutter said that:
“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.”
With the implementation of blockchain technology, the NatWest bank would be able to accurately identify and publish lender specific deals on the blockchain platform in real time. The lenders will be able to view the deals directly without relying on faxes, emails, and telephone calls.
According to the programme director of the NatWest, Trish Arksey:
“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.”