LSTA releases guidelines on papers needed from new loan participants

By Sara Rosenberg

New York, Nov. 30 - The Loan Syndications & Trading Association released a set of "Know Your Customer Guidelines" that describe in detail the documents many agent banks and counterparties require from new loan participants, such as hedge funds or collateralized loan obligations, before agreeing to trade with them or letting them into a lenders' group, according to a news release.

For example, hedge funds must produce a number of documents, including those to evidence formation and good standing as well as tax forms and annual reports. Some of the documents that a bank based in the United States must provide include a copy of its license, articles of association and proof of its regulated status.

"The LSTA's settlement committee recognized that trades often get held up because agent banks or counterparties have to perform a considerable amount of due diligence. By standardizing the required KYC documentation, we can expedite the process and cut settlement times," Ellen Hefferan, director of operations at the LSTA, said in the release.

The LSTA's settlement committee was formed last spring to find ways to reduce trade settlement times. In addition to the guidelines, the committee is looking at revising delayed compensation rules, shifting date polls and implementing credit identifiers, including facility-level CUSIPs, contract-level identifiers and Markit Entity Identifiers.

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