PrivEx brings syndicated loan-trading platform to Europe
While big US banks edge slowly towards exchange-like trading of loans, a group of market veterans have tested a system in Asia and will soon launch in Europe.
PrivEx is a digital exchange regulated by the Monetary Authority of Singapore (MAS) that set up in Asia last year to enable banks and institutional investors to trade syndicated loans. It is now preparing to launch in Europe.
The secondary market in syndicated loans has grown in recent years as banks become increasingly reluctant to hold these assets for long after borrowers have paid them to raise the money.
Facing high capital charges and required to provision from the outset against likely future credit deterioration even on still new and performing loans, banks are no longer through-the-cycle relationship lenders.
Rather, they originate to distribute, sometimes to deposit-heavy smaller banks, often to collateralized loan obligation (CLO) and other private credit funds.
With the PrivEx system, parties complete a single master confidentiality undertaking, which covers all transactions
Ever since the great financial crisis, banks have patiently worked to remove restrictions on transferability and reduce requirements to seek borrower’s consent for this on funded loans. But the focus has been on easing transferability in the primary market.