Two European and one Japanese bank one have completed the first blockchain-based syndicated loan.
Together with France’s BNP Paribas and Japan’s Mitsubishi UFJ Financial Group, Spain’s banking behemoth BBVA utilized a private blockchain network in arranging a syndicated loan amounting to US$150 million for grid operator Red Electrica. Initially reported by the Financial Times, legal advisers were also granted access to the private blockchain network allowing instant exchange of information among all the parties to the deal.
According to BBVA, the blockchain pilot is proof that distributed ledger technology could transform the syndicated loan business by simplifying and shortening the waiting period from around two weeks to between 24 and 48 hours. The time taken to process documentation and sign the syndicated loans, for instance, can be reduced to a few minutes from several hours. Additionally, clients will reduce their operating costs since by having the system recording everything automatically, back office expenses can be cut significantly.
US$91 Million Corporate Loan
This is not the first time that BBVA is turning to blockchain technology. Earlier this year as CCN reported, the second-largest lender in Spain issued a corporate loan amounting to US$91 million on the blockchain. Just like in the case of the syndicated loan that it issued jointly with other co-lenders, blockchain technology assisted the Spanish bank in reducing the processing time.
At the time the bank’s CEO, Carlos Torres Vila stated that distributed ledger technology would transform financial services significantly:
“Blockchain can offer clear advantages for all sides in the corporate loan market in terms of efficiency, transparency, security. It’s another example of how disruptive technology can be used to add value to financial services,