Singapore, 13 January 2021 – iLex kicked off 2021 with a ‘Building the Future of the Loan Market in Asia’ webinar held jointly with our partner IHS Markit, which was attended by over 150 participants. This was the second webinar we have organised, with the first one on 15 October 2020 focusing on the Australian Corporate Loan Market.
Our expert panel for the Asian webinar included Mildred Chua from DBS, Eugene Lau from CCB, Fouad Samra from TOR and Andrew Tan from Muzinich. Together with the panel, the webinar discussed the major change drivers that are crucial to transform the Asian loan market.
In a poll conducted with the participants, 46% of them see ‘Increased liquidity with new players and more secondary activities’ to be the most important game changer, followed by 17% ‘Standardisation of documentation’, 15% ‘More transparent pricing data’, 12% ‘Efficient settlement solutions’ and 10% ‘New market infrastructure & regulations’.
Panelists all highlighted that the loan market has lagged bonds and other asset classes, many of which have transformed through technology in the past 15 years. The goal is to see loan market develop in the same direction.
The panel agreed that technology, such as the electronic platform and digital solutions that iLex is developing, can significantly help enhance overall productivity and efficiency for both primary and secondary activities, creating an avenue for better origination and connectivity with arrangers and lenders’ access to deal opportunities.
Technology can also aid with capturing and sharing of loan data more efficiently and consistently, including pricing, information, LGD ratios etc, enabling greater transparency in pricing and increasing overall market liquidity. This will increase the size and breadth of the market, deliver better pricing and underwriting execution for borrowers and more benefits to market participants.
Across the board, the Asian loan market is expected to continue witnessing significant growth opportunities, as well as the increasing weight and participation of institutional investors, including global and APAC-focused private debt funds and other non-bank lenders.
Additionally, panelists also see significant collaboration opportunities between banks and non-bank lenders in Asia. Over time, as more Asian borrowers become familiar with non-bank lenders, all parties could benefit from the potential synergies as borrowers can be better served by diversified lenders based on ability, appetite and liquidity across the capital structure and borrower segments.
However, some of the key challenges highlighted which include the lack of transparency in pricing and data, and the absence of CLOs in the Asian market, are barriers to having more diversified investors and limit efficiency for banks in optimising balance sheets, hence the need for a more active secondary market with better execution. Mindset shifts from the stakeholders, from the management of banks to practitioners and borrowers, are also very much needed.
Perhaps, with the combination of various factors – increasing regulatory and capital requirements, persistently low interest rate environment, credit and productivity stress as a result of Covid-19 and the latest technologies including digital assets and tokens – could lead to a shift in behaviors and an inevitable and much-needed digital transformation of the institutional lending ecosystem.
Looking into 2021, the panelists remain positive about the many opportunities, given the increased pipeline and liquidity in the market. Institutional investors are expected to play a greater role in both primary and secondary deals in the region.
iLex is a fintech start-up creating the first all-to-all electronic market and trading platform for corporate loans, delivering an augmented network and targeted deal opportunities for loan market participants using its proprietary matching engine. Through the use of its digital solutions and strategic partnerships, iLex will facilitate the end-to-end automation of primary syndication and secondary market workflows and provide a comprehensive source of loan market data and analytics. Supported by industry players in the loan market ecosystem, iLex is leading innovation to deliver better liquidity, efficiency and intelligence to the corporate loan market. iLex was launched in 2019 and is based in Singapore. For more information, please visit www.ilex.sg.