Yesterday the European Investment Bank Group announced that it granted BBVA a €60 million synthetic guarantee to be used to finance up to €360 million new investment projects for Spanish SMEs. The blockchain-based deal is intended to enable financing at favorable terms such as lower rates or longer repayment periods.
The European Investment Bank Group was formed by the European Investment Bank (EIB) and the European Investment Fund (EIF). The EIB, EIF and BBVA negotiated the deal using blockchain technology, so all the steps from the start to signing were logged on the blockchain. The project uses Hyperledger Fabric and has now been used to negotiate several different types of BBVA loans. In most of the previous cases, BBVA was granting the loan.
Nowadays banks have complex requirements about how much capital they need for different purposes to ensure liquidity. By getting a guarantee from the EIB Group, this frees up capital for BBVA.
EIF’s Chief Executive, Pier Luigi Gilibert explained the rationale: “SME synthetic securitization agreements are deployed by a number of European banks to provide regulatory capital relief. EIF is pleased to be working with BBVA and the EIB to allow BBVA to provide additional access to finance for Spanish SMEs.”
It’s the first corporate loan securitization using blockchain technology in the European Union. Four months ago Zheshang Bank in China issued a securitized loan note backed by trade receivables, and these underlying invoices were also logged on a blockchain.
BBVA’s blockchain activity
BBVA’s blockchain-based loans are becoming more frequent. A week ago it announced a term loan with Porsche. Just over a month ago it arranged a syndicated loan for Spanish electricity grid Red Electrica. Other loans include for ACS, Repsol and consulting firm Indra.
The bank is a member of Hyperledger, part of the Linux Foundation, as well as the Enterprise Ethereum Alliance. Additionally, it’s a shareholder in enterprise blockchain firm R3. Earlier this year BBVA revealed that it’s experimenting internally with tokens.