BBVA Bank Settles $170M Syndicated Loan with Blockchain
BNP Paribas and MUFG bank have also participated in the transaction as well as the operator of Spain’s national grid, Red Electrica Corporation.
Spain’s multinational bank BBVA claims that it successfully settled a 150 million euro ($171 million) syndicated loan by means of blockchain technology. The deal was a live transaction, not a trial, BBVA said in a press release on Wednesday, adding that its distributed ledger technology-based proprietary platform is now fully operational.
Syndicated loans are financial instruments that require two or more lenders to accept the size and risk related to them. In that case, BBVA was negotiating with France’s BNP Paribas and Japan’s MUFG banks to lend 150 million euro to the operator of Spain’s national grid, the Red Electrica Corporation. Two legal advisors, Linklaters S.L.P. and Herbert Smith Freehills LLP, also participated.
All steps in the deal-making process were settled by DLT, which significantly speeded up the process and increased the trust as all activities were available to the six involved parties at any time, BBVA said.
“BBVA is simplifying the processes related to corporate financing and is betting on the use of new technologies, like blockchain, to digitize loan negotiations and contracting,” Ricardo Laiseca, head of global finance at BBVA, explained in the press release.
BBVA used the blockchain technology of Linux-led project Hyperledger as it is a private DLT system. After the deal was signed, BBVA recorded a document identifier of the loan on the Ethereum public testnet with the aim of guaranteeing the immutability of the process. The Spanish bank is part of the Ethereum Enterprise Alliance (EEA), a body that unites various companies, including banks, with the goal to develop business blockchain applications on the Ethereum Network.
“Blockchain technology offers advantages that are particularly tangible in processes that involve a substantial number of parties, such as in syndicated funding projects,” BBVA said.
Last month, British NatWest bank announced a plan for setting up a blockchain-based platform for syndicated lending.