Investment Plan for Europe: BBVA and EIB Group sign the first synthetic securitization in blockchain of €1 billion
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.
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).
Blockchain offers a better client experience by automating the negotiation process and minimizing operational risks
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."
BBVA is committed to boosting the growth, competitiveness and digitization of the Spanish SMEs
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.
Background information
The EIB Group is composed of the European Investment Bank and the European Investment Fund. The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy objectives. The European Investment Fund (EIF) is focused in supporting Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. The EIF designs and develops seed and growth capital, guarantee and microfinance instruments that specifically target this market segment.
The Investment Plan for Europe, known as the “Juncker Plan”, is one of the European Commission’s top priorities. It focuses on boosting investment to generate jobs and growth by making smarter use of new and existing financial resources, removing obstacles to investment, and providing visibility and technical assistance to investment projects.
The European Fund for Strategic Investments (EFSI) is the main pillar of the "Juncker Plan" and provides first loss guarantees, enabling the EIB to invest in more projects that often come with greater risks. EFSI has already yielded tangible results. The projects and agreements approved for financing under EFSI are expected to mobilise more than EUR 359bn in investment and support almost 850 000 SMEs in the 28 Member States.