BBVA, EIB Group Use Blockchain for €1B Synthetic Securitization

[Ozark]

Spanish multinational bank BBVA worked with the European Investment Bank Group to implement a blockchain for the synthetic securitization of 1 billion euro.

Spanish banking giant BBVA and the European Investment Bank Group (EIB Group) leveraged blockchain to sign a synthetic securitization of 1 billion euro. The synthetic securitization is a financial process through which banks mitigate specific risks. In simple terms, the procedure represents an insurance policy needed by banks to hedge the risks related to their small to medium enterprise (SME) loan portfolio.

The agreement is said to be the first blockchain-based synthetic securitization in the European Union (EU) and the third blockchain-powered corporate loan securitization conducted by the EIB Group in collaboration with BBVA. Also, the two entities will offer 360 million euro to fund investment projects of SMEs and mid-cap firms.

The EIB Group and BBVA signed a synthetic securitization agreement to finance Spanish SMEs with about 600 million euro for investment projects of Spanish SMEs.

The EIB, which was developed by the European Investment Bank (EIB) and European Investment Fund (EIF), sent a 60 million euro synthetic guarantee to BBVA, which will be applied to unlock up to 360 million euro to finance new investment projects of Spanish SMEs and midcaps. Thanks to the agreement, Spanish SMEs will benefit from loans with lower interest rates, better terms, and more extended repayment deadlines.

During the process, BBVA offered its distributed ledger technology (DLT) platform, which was applied by three parties to handle the documentation process. The negotiation is stored on a private version of Hyperledger while a hash of the signed agreement was recorded on Ethereum.

EIB VP Emma Navarro commented on the deal:

“We are delighted to support the EIB Group’s third mezzanine guarantee operation in Spain. Thanks to our partnership with BBVA, Spanish SMEs will be able to benefit from the advantages of our financing. This agreement combines EIF’s and EIB’s resources under the Juncker Plan to increase BBVA’s support for Spanish businesses, fostering job creation and economic growth”.

EIF CEO Pier Luigi Gilibert stated:

“SME synthetic securitization agreements are deployed by a number of European banks to provide regulatory capital relief. EIF is pleased to be working with BBVA and the EIB to allow BBVA to provide additional access to finance for Spanish SMEs. Joint EIB and EIF support via EFSI funds offer a competitive solution for BBVA which will serve to boost the supply of finance in the real economy”.

Last week, we reported that BBVA leveraged blockchain for a €150 million term loan for Austria-based Porsche Holding Salzburg. This was the first instance when the Bilbao-based bank assisted a non-Spanish corporate client.

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