Spanish bank arranges $150-million syndicated loan over blockchain

BBVA sees significant benefits, as it pilots distributed ledger technology

Spanish bank arranges $150-million syndicated loan over blockchain

Spanish bank BBVA has completed, in partnership with two other lenders, the first syndicated loan on the blockchain, a part of a pilot, The Financial Times has reported.

According to the FT report, the Spanish banking giant yesterday used a private blockchain network to arrange a $150-million syndicated loan for Red Electrica, the Spanish grid operator. Japan’s MUFG and France’s BNP Paribas were co-lenders, while Linklaters and Herbert Smith Freehills were the chosen legal advisers for the deal. All parties had access to the network, which allowed them to instantly exchange information. That information was time-stamped to show exactly when each event occurred and the network was secured with user codes. Once the agreement was signed, it received a unique identifier that was recorded on the Ethereum network to preserve its authenticity.

According to BBVA, blockchain technology allows the time needed for completing syndicated loans to be reduced from about two weeks to a day or two. The whole process is also greatly simplified. Loan signing and documentation processing, which typically takes several hours, can be completed in minutes with the help of blockchain.

BBVA also claims that the technology could lead to “huge reduction in internal costs” for clients. “Everything is automatically recorded by the system, in terms of back office and operational costs,” BBVA’s head of global finance Ricardo Laiseca said, as quoted by the FT.

Laiseca also said that the bank had several other syndicated loans that it planned to complete over the blockchain, as part of the pilot.

“We are offering these technologies for collaboration with any other banks . . . This is not just for BBVA, we feel that as a second stage (we are) working on a new markets infrastructure which will be good for everyone,” he told the FT.

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