BBVA Spain, the second-largest bank in the country has successfully tried blockchain technology for a syndicated loan worth $150m according to a Financial Times report. It is the first time that a syndicated loan which usually involves a group of lenders and a borrower is conducted over a blockchain.
The report says that the transaction was conducted on a private blockchain and involved six companies that play different roles.
The BBVA, French banking group BNP Paribas, and Japan’s Mitsubishi UFJ Financial Group (MUFG) served as the syndicate and provided a loan to electricity grid company, Red Eléctrica Corporación. UK-based legal firms Linklaters and Herbert Smith Freehill served as advisors to BBVA.
How The Blockchain Syndicate Loan Deal Was Carried Out
BBVA employed enterprise blockchain, Hyperledger, to record each step of the syndicated loan deal including negotiations. User codes were assigned to the participating parties and tagged along with a timestamp on the network to indicate when each event took place.
Once an agreement was reached and the contract signed, the deal was given a unique identifier and recorded on the Ethereum blockchain so that third parties would not have access to the information.
BBVA’s head of global finance, Ricardo Laiseca stated in the report that transferring syndicated loans on a blockchain, makes the process faster and saves ‘internal costs’ for clients.
For instance, these loans were usually completed in two weeks but would take only a day or two when done on a blockchain.
In the not so distant future, the BBVA is also planning to move “five to six” of such syndicated loans on a blockchain according to the top official.