Major industry players target collateral lending using R3

Market participants and R3 members CIBC, Commerzbank, Credit Suisse, UBS and ING have collaborated with HQLAx to produce a collateral lending offering.
By Paul Walsh
Blockchain working group R3, five of its members and financial resource and liquidity management firm HQLAx have created a collateral lending offering for liquidity transfers.

R3 members CIBC, Commerzbank, Credit Suisse, ING and UBS together with HQLAx aim to produce an operating model for a digital collateral receipt lending marketplace.

The model is built on R3’s DLT platform Corda which aims to improve synchrony of institutions’ financial agreements.

According to a statement, the project’s intended benefits include helping market participants redistribute liquidity, increase regulatory transparency of collateral chains and mitigate systemic risks.

“The implementation of new bank regulations for liquidity, mandatory clearing, and margin requirements for OTC derivatives has caused a significant increase in demand for high quality liquid assets,” said David Rutter, CEO of R3.

“As a result, there is a heightened need for a marketplace that facilitates large scale, cost efficient collateral transfers across the global financial ecosystem, and Corda exceeded the most demanding requirements.”

As part of the transfer from laboratory to proof of concept stage, R3 and HQLAx also plan to consult the regulatory community to shape the platform for production.

“The collaborative effort and proactive engagement by the project participants was truly impressive, and the value proposition to help shape the target operating model of the HQLAX platform resonated strongly with the bank participants,” said Guido Stroemer, CEO of HQLAx.

“This project is an excellent example of the R3 business model of testing use cases in its lab and research centre in preparation for production ready deployment.”

The move is the latest development for blockchain working group R3 following news that the Illinois Department of Financial and Professional Regulation had become the first US state-level regulator to join the venture.