Spain-based banking firm BBVA (NYSE:BBVA) has reportedly complicated a pilot that would put a syndicated loan worth $150 million on the electronic ledger i.e. blockchain. According to a Financial Times report dated 7th November 2018, the loan thus arranged by the financial institution will be directed towards Spanish national electrical grid operator Red Electrica.
Syndicate loan is the sum amount of money lend by various financial institutions for a single borrower. The syndicate load arranged by BBVA included co-lenders Japan-based Mitsubishi UFJ Financial Group (OTCMKTS:MBFJF) as well as French-based BNP Paribas (OTCMKTS:BNPQF).
It has been revealed that the data corresponding to the loan was time-stamped during the various stages of the lending. Three banks reportedly entered a loan agreement and recorded the deal on the ethereum blockchain as a way to preserve the authenticity of the loan.
Banks usually rely on the traditional process of syndicate loan to exchange crucial information. The traditional process, however, causes delays in the process of gathering the huge amount and also costs on the higher side. The blockchain is being perceived as an alternative to the traditional method. The electronic ledger technology can help financial institutions share data and information in real-time as well as reduce the process of gathering loan from a couple of weeks to a few days. The reduced processing time will also reduce the operational cost of the gathering the required loan.
According to reports, BBVA is mulling to test try blockchain technology for syndicated loans in the near future. The bank has allegedly tested the technology in the past as well as in April 2018 the bank reportedly completed a test trial that included issuance of $91 million corporate loans through private blockchain and the public ethereum blockchain.
According to Ricardo Laiseca the Head of Global Finance at BBVA there are about five or six additional pilot loans in the process. Laiseca further said that the financial institution is now focusing on simplifying the process in which the corporate financing operates. The BBVA is relying on the blockchain and similar technology to digitize the process of negotiating the loan and signing contracts. Laiseca added that BBVA is in talks with its corporate clients as it desires to offer the clients with the innovative financing solutions.
Commenting on the move Teresa Quirós, the CFO of the organization who received the loan stated that the transaction is a part of the company’s efforts to promote digital innovation and transformation as the way to prosper growth and efficiency that may enable the company in addressing the complexity introduced by the changes in the energy ecosystem.
The blockchain is the fundamental technology behind the cryptocurrencies such as Bitcoin. The technology for long has been believed to be more efficient as a secure platform for transferring money and sensitive data between parties. The technology is now looked upon as a method together syndicated loan in the timely fashion.
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