Built on the R3 Corda distributed ledger platform, the proof-of-concept provides a digital collateral receipt (DCR) lending marketplace to help participants to redistribute liquidity more effectively and cost-efficiently.
According to HQLAX, the marketplace could also improve transparency of collateral chains and mitigate systemic risk by allowing for orderly unwinding in the case of a default.
The group now plans to create a live pilot and production platform, and will engage with regulators to showcase the prototype and gain feedback.
David Rutter, CEO of R3, commented: “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. 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.”
Guido Stroemer, CEO of HQLAX, added: “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.”
“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 R3 member banks involved were CIBC, Commerzbank, Credit Suisse, ING and UBS.
Thorsten Kanzler, divisional board member for group treasury at Commerzbank, said: “The digital collateral receipt lending marketplace is an important step on our way to build up a digital treasury product range.”
“Once live, the lending place will support Commerzbank’s treasury in managing regulatory requirements even more cost efficiently by facilitating collateral transfers on a distributed ledger technology platform.”
Ivar Wiersma, head of wholesale banking innovation at ING, said: “In line with our culture and our strategy, ING is eager to continue to collaborate and pursue this forward-thinking opportunity to progress HQLAX to a live pilot phase, in line with our ambition to get distributed ledger technology out of the lab, and delivering tangible business value.”