BME and Renta 4 Banco have carried out the first test for the digitisation of the certification process of collateral pledge using Blockchain technology, eliminating the need to use and exchange physical certificates.
The proof of concept entailed the constitution and release of collateral pledged by Renta 4 Banco to cover customer’s positions at BME Clearing, BME’s central counterparty. Blockchain-based technology has made it possible to eliminate the creation and exchange of physical certificates in these transactions, digitising all the processes and ensuring that all participants in the Blockchain have access to the information in real time.
The proof has shown a reduction in the total times of end-to-end processes exceeding 80%. Moreover, the system will bring about a radical improvement in the participants’ operational and risk management as they will gain direct access to the information and participate in the validation of pledge agreements.
This proof of concept has been fully developed by BME’s DLT-Lab, through which BME analyses and explores the use of Blockchain technology in the digitalisation of processes and new operational models for improving current financial processes, in collaboration with the regulators and different financial institutions. DLT-Lab has worked together with those infrastructures involved in the process and the BME subsidiaries BME Clearing, the Spanish central securities depository IBERCLEAR and Renta 4 Banco as the pilot firm.
Berta Ares, Head of Digital Transformation, BME, points out that "DLT technology allows us to reduce times drastically and improve the operation and control of the system, providing legal certainty for electronically generated certificates and maintaining privacy and compliance with the General Data Protection Regulation".
Teresa Sánchez Alonso, Head of IT Systems, Renta 4 Banco, highlights that "this innovation project is aligned with the strategy of digitisation, automation and continuous improvement of Renta 4 Banco’s customer service”
BME and Renta 4 Banco will keep working on the developments necessary to allow the system to go live by the end of 2019.