Nine global banks are testing blockchain and smart contract technologies to see if they can improve the syndicated loan market.

The bank consortium R3 CEV is managing the proof of concept. R3 members State Street, U.S. Bank, Wells Fargo, BBVA, Danske Bank, Royal Bank of Scotland, Scotiabank and Société Générale are participating in the initiative, which will run through the end of the year, according to a Tuesday news release. Buy-side firms AllianceBernstein, Eaton Vance Management, KKR and Oak Hill Advisors are also involved.

The participants are seeking proof that processing loan data exclusively on a blockchain could eliminate the cost for each to maintain their own lending system. Blockchain technology, which first came to light as the technology underpinning the digital currency bitcoin, has captivated banks' interest in its potential to lower costs and improve speed, efficiency and record-keeping capabilities for financial transactions.

The project was arranged by Credit Suisse and Synaps Loans, which is a joint venture of the financial services software firm Ipreo and the smart contracts firm Symbiont. Synaps aims to help organizations reduce manual reviews, data re-entry and systems reconciliation by giving loan investors direct access to an authoritative system of record for syndicated loan data.

"This demonstration sets us on a path to increase efficiency and reduce costs, which will benefit banks and clients alike," Emmanuel Aidoo, head of the distributed ledger and blockchain effort at Credit Suisse, said in the news release. "By connecting a network of agent banks through blockchain, we can achieve faster and more certain settlements in the loan market."