Banking News

BBVA and Red Eléctrica sign blockchain syndicated loan

BBVA

Today the Spanish bank BBVA and the owner of the Spanish electricity grid, Red Electrica announced that they have partnered to deliver a syndicated loan arrangement using blockchain. The arrangement was concluded on BBVA’s proprietary distributed ledger platform.

DLT Breakthrough

The deal is worth €150 million, and BBVA granted the loan alongside Japan’s largest bank, MUFG, and the French international banking group BNP Paribas. The transaction follows multiple pilots in the industry designed to test the potential applications of distributed ledger technology (DLT).

The negotiation process of the loan arrangement was closed over the blockchain network, allowing for a speedier than usual process while also ensuring full documentation tracking and negotiation transparency.

The transaction was arranged over a private blockchain network, with six separate entities participating in the process: Red Eléctrica; the three funding banks: BBVA, BNP Paribas and MUFG; and the two legal advisors Linklaters and Herbert Smith Freehills.

Each step of the negotiation leading to the signing of the final agreement was recorded on the DLT network along with a user identity and the timestamp. By sharing the information on the private blockchain network, all parties could track the progress of the negotiation and its status. The network uses Hyperledger Fabric technology.

Once the contract was signed, a unique document identifier was recorded on the testnet of  Ethereum’s public Blockchain network. If the document ever changes then a comparison with the Ethereum record would fail.

Tresa Quirós, CFO of Red Eléctrica said of the arrangement; “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.”

Other projects

Finastra launched their Fusion LenderComm syndicated loans platform in April. However, at this stage, the project focuses on document sharing, not necessarily the negotiation process. Fintech Symbiont is working on a syndicated loans platform with Finastra competitor Ipreo which is part of IHS Markit.

BBVA previously ran blockchain corporate loan pilots, but not for syndicated lending. In April they issued a €75m loan to Indra Minsait. In July they negotiated and closed a €100m loan for construction company ACS. The bank is part of a group testing a warrants registration blockchain run by the Spanish stock market operator BME. It’s even running a pilot token project with staff. And BBVA’s Carlos Kuchkovsky is Chairman of the Hyperledger Governing Board.