Last week Spanish bank BBVA negotiated a €220 million sustainable “Schuldschein” loan for the Madrid Government using blockchain. Over the past year, BBVA has arranged many different types of loans using its blockchain loan platform.
Schuldschein loans are becoming increasingly popular because they are flexible and structured as a hybrid between bonds and loans. This sort of loan is less expensive compared to a bond, but tradeable. In June 2017 LBBW used blockchain to help Daimler to launch a €100 million Schuldschein.
The BBVA negotiated loan aims to finance sustainable development within Madrid. ICMA’s Greed Bond Principles were used for the debt structuring. These recommend transparency particularly regarding the environmental impact of the funds use.
Just last week BBVA executive board member José Manuel González-Páramo spoke about the need for Europe to invest €180 billion a year to achieve the EU’s climate action goals for the 2030 Paris Agreement. According to the European Commission, 36 percent of CO2 emissions are from buildings. González-Páramo stated that larger companies have the resources to address these issues. Hence funding should be targeted towards SMEs.
Back to the blockchain loan, each of the parties ran their own node. The aim is to reduce the negotiation time by digitizing the process, and each step in the process is transparent to all parties.
Assuming this pilot was on the same platform BBVA usually uses, it leverages the permissioned Hyperledger Fabric blockchain. After issuing the loan, a unique hash is registered on the public Ethereum testnet.
Below are examples of previous BBVA loan pilots.
|Apr 2018||corporate loan||€75m||Indra Minsait|
|June 2018||revolving credit||€325m||Repsol|
|July 2018||corporate loan||€100m||ACS|
|Nov 2018||syndicated loan||€150m||Red Electrica|
|Dec 2018||term loan||€150m||Porsche|
|Dec 2018||synthetic guarantee||€60m|| European
|Feb 2019||structured green bond||€35m||MAPFRE|