BBVA and EIB arrange EUR1 billion synthetic securitization on blockchain

Source: BBVA

BBVA and the European Investment Bank Group (EIB) have signed a synthetic securitization of €1 billion.

The agreement is a very innovative financing operation, as it is the first synthetic securitization to be supported by blockchain technology in the European Union and the third synthetic corporate loan securitisation signed by the EIB Group and BBVA. Moreover, BBVA and EIB Group will provide €360 million to finance investments projects of SMEs and midcaps.

EIB Group and BBVA sign second synthetic securitization in Spain

The European Investment Bank Group and BBVA have signed a synthetic securitization to finance investment projects of Spanish SMEs. The agreement will enable the provision of €600 million.

The European Investment Bank Group, formed by the European Investment Bank (EIB) and European Investment Fund (EIF), have granted BBVA a €60 million synthetic guarantee that will be used to provide up to €360 million to finance new investment projects of small Spanish SMEs and midcaps. The agreement aims to foster support for small and medium-sized firms in all sectors of the Spanish economy, providing them with loans on favorable terms that enable them to obtain funding with lower interest rates and longer repayment periods.

The agreement has been possible thanks to the support of the European Fund for Strategic Investments (EFSI). EFSI is the central pillar of the Investment Plan for Europe, known as the “Juncker Plan”. Its support increases the EIB Group’s capacity to finance investment projects that, in line with the Plan’s criteria, involve activities that by their structure or nature have a higher risk profile but which foster firms’ competitiveness and create jobs.

The agreement is a very innovative financing operation, as it is the first corporate loan securitization to be supported by the blockchain technology in the European Union. Blockchain offers a better client experience by automating the negotiation process and minimizing operational risks, thanks to the inherent characteristics of this technology. The DLT platform developed by BBVA was used by the three parties to negotiate this agreement, from the origination to the agreement signing, and also ensuring traceability and immutability, making that way the documentation process safer and more transparent. All the negotiation was recorded on the private blockchain Hyperledger, while a hash or unique identifier of the signed agreement were recorded on the public blockchain Ethereum (testnet).

About this project, EIB Vice President, Emma Navarro stated: “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’s Chief Executive, Pier Luigi Gilibert said: “SME synthetic securitisation 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”.

The CEO of BBVA, Carlos Torres, added: “​BBVA is committed to boosting the growth, competitiveness and digitization of the Spanish SMEs. In addition, we are proud of the DLT platform developed in-house by BBVA, which was used to negotiate this agreement.”

Over the last few years, the EIB Group and BBVA have signed a number of other operations targeting SMEs. In November 2017, they provided €300 million to finance innovation and the digitalisation of small Spanish businesses; in June 2016, they launched a €600 million credit line; and in 2015, they approved a EUR 1 billion credit line to foster economic recovery and job creation in SMEs.

The first mezzanine guarantee signed in June 2017 with BBVA has so far enabled approx. €1 billion worth of finance for firms in various sectors, such as wholesale, transport and tourism. Signed in March 2018, has enabled up to €600 million of funding to new investment projects of small Spanish businesses.

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