In a world first, the Spanish bank has executed a €150 million ($170 million) syndicated loan deal with Red Electrica Corporation using the firm’s blockchain platform.
Blockchain-Powered Syndicated Loan
Spanish banking giant BBVA, along with BNP Paribas and MUFG, has delivered the world’s first blockchain based syndicated loan. The loan was granted to Red Electrica Corporation, a Spanish firm which operates the national electricity grid in the country.
Announced last week on BBVA’s website, the deal was executed in “record speed” using the bank’s proprietary, blockchain-powered platform.
Details of the Deal
It is reported that the entire negotiation process was closed over the blockchain network which enabled quick execution, complete documentation tracking, and transparency in negotiations.
BBVA is leveraging blockchain because of the benefits it can bring in helping the bank to improve client experience, simplify the process and minimize risks.
Blockchain technology can deliver tangible benefits in processes involving large numbers of stakeholders like in case of “syndicated funding projects”.
The loan was executed over a private blockchain on which six stakeholders participated – the customer, Red Electrica Corporation, the lending banks, BBVA, BNP Paribas and MUFG, and two legal advisors, Linklaters S.L.P. and Herbert Smith Freehills LLP.
Benefits of Leveraging Blockchain
Speaking about the milestone achievement, BBVA said:
Each step of the negotiation leading to the signing of the final agreement is recorded in the DLT network along with a user code and the timestamp that identified the moment at which the event occurred.
All of the parties participating on the private Hyperledger based network can access the same information with the reliability that the data can’t be changed.
At the final step of contract signing, a “unique document identifier” gets recorded on the Ethereum public blockchain network. By doing this, while the confidentiality is maintained, immutability against third parties is also guaranteed.
Teresa Quirós, CFO of Red Eléctrica said:
This transaction is part of our company’s initiative to push digital transformation and innovation as levers for growth and efficiency, enabling us to address the challenges that the changing energy environment represents to our company.
Ricardo Laiseca, Head of Global Finance at BBVA, also noted:
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. We work with our corporate clients to be able to provide them with the most innovative financing solutions.
Spanish banks have shown a proactive approach towards embracing blockchain technology. Banco Santander is another Spanish bank that is part of RippleNet and uses the xCurrent platform for settlements.
Do you think that more banks will adopt blockchain based solutions in 2019? Let us know in the comments below.
Images courtesy of Wikimedia Commons, Shutterstock
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Author: Kuldeep Kaul