Spain’s BBVA — along with partner banks MUFG of Japan and BNP Paribas of France — completed the first syndicated loan on the blockchain.
Last week, BBVA and its co-lenders used a private blockchain network to secure a $150 million syndicated loan for Red Eléctrica, the Spanish grid operator. In addition, legal advisor firms Linklaters and Herbert Smith Freehills were given access to the system so that all parties could instantly exchange information.
The information was time-stamped to show when each event was completed. BBVA has already revealed that blockchain speeds up the syndicated loan process from about two weeks to a day or two, while loan signing and documentation processing, which usually takes hours, can now be done in minutes.
The blockchain network was secured with user codes. Once the contract was signed, it was given a unique identifier that was recorded on the Ethereum blockchain.
In addition to saving time, moving syndicated loans to the blockchain will deliver a “huge reduction in internal costs” for clients, Ricardo Laiseca, BBVA’s head of global finance, told the Financial Times, adding that “everything is automatically recorded by the system, in terms of back-office and operational costs.”
This is not BBVA’s first move into blockchain. Last year, it executed its first cross-border payments using a system based on the software that supports bitcoin. Using a program built by San Francisco-based Ripple, BBVA transferred about 50 Euro-denominated payments to Mexico from Spain in seconds. These types of transactions normally take up to four days to clear.
Through the service, BBVA is giving corporate customers a quicker and cheaper way to pay overseas suppliers and execute other international transactions, said Alicia Pertusa, managing director of corporate and investment banking of BBVA’s digital transformation unit.
“It’s not just the real-time transfer that’s important here, but the information we can send with the payment,” Pertusa said. “That’s very relevant for our clients because they could begin streamlining their reconciliation systems.”