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In recent years, we have focussed significant resources on
helping the industry address two perennial challenges: operational
risk and settlement risk. We have developed new solutions,
including Loan Reconciliation and ADFlow, to address specific
aspects of risk management and, having hit a number of important
adoption/usage milestones in 2021, we are continuing to innovate
and streamline the integration between our products.
We developed Loan Reconciliation to support lender and agent
banks by automating the validation of position data. The solution
gives users confidence that they have the correct position
information as loan assets are traded and pass through lifecycle
events. This avoids discrepancies that could require manual
reconciliation, lead to incorrect accruals and, ultimately, delay
settlement.
Agent and party submission for Loan Reconciliation have risen
rapidly over the past 12 months and I am pleased to report that in
April 2021 we hit a new record, almost doubling the submissions we
saw in April 2020. The huge increase is a result of the mass
adoption we have witnessed as lenders have looked to cut out the
white noise associated with reconciling their positions to
agents.
Success rate
Of course, submission totals only tell half the story; the
success rate is also critically important if there is to be any
benefit to the lenders/vendors reconciling and if there is to be
confidence in the platform. On this metric, too, the news is very
positive as we have consistently maintained a high success rate,
with the majority of positions being delivered via direct
integration (MQ) or SFTP.
With submission rates and accuracy so high, we have now been
able to offer our network additional benefits. We have brought our
Loan Reconciliation platform into
our consolidated UI alongside ClearPar, Notice Manager and our
other solutions, so users can view their positions, perform actions
on trades and verify their loan notices in one place.
Having these tools in one UI was just the first step; making
them interoperable was another key success we have delivered for
our users. We have empowered our clients to scale their businesses
by automating many of the administrative tasks they face on a daily
basis, such as verifying affiliates on open trades to agents;
delivering notifications of the need for borrower consent; and
adding and removing Debtdomain access to deal rooms, based on
holdings in Loan Reconciliation.
Cash settlement instructions
In parallel with increasing Loan Reconciliation usage, we have
seen growing adoption of ADFlow, our solution for the secure
exchange of cash settlement instructions (and contact details).
ADFlow was developed for our Loan Reconciliation users in response
to a request from our clients for an alternative to the
long-established practice of exchanging settlement instructions in
bespoke documents via fax and email. Our clients wanted to reduce
their exposure to fraud and operational risk, and eliminate the
need for call-backs, and we delivered a solution for them.
After working with the LMA and LSTA to create a standardized
format for Administrative Details Forms, we developed a secure
online portal where lenders can upload and manage their SSI and ADF
data, and where agents and counterparties can access the details
they need for their loan trade settlement or servicing events. The
solution includes a four-eye check of all instructions and a full
audit history of any changes. It is also integrated with ClearPar
and Loan Reconciliation. This ensures trade data and settlement are
synchronized with the latest settlement instructions and lender
affiliation, streamlining the loan trade settlement process. Agents
and counterparties can elect to view this data in the platform or
have the ADF data sent from ADFlow directly to their agent and
trading systems of record via ADF messaging. This reduces
operational risk further by removing the need to dual key this
information and eliminates the need for controls to manage a manual
process.
The introduction of ADFlow has delivered significant benefits to
the industry, helping firms avoid costly fraud incidents and
significantly reducing their operational risk, while increasing
efficiency. The success is borne out by the huge increases in
adoption and usage numbers we have seen over the past year.
These are exciting times as the industry's appetite for
technology, automation and innovation increases, and we look
forward to continuing to work with our clients and partners to
ensure they stay ahead of the curve.
Posted 12 July 2021 by David Jesson, Managing Director, Loan Platforms, S&P Global Market Intelligence
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
