Sberbank and Severstal announce cooperation in carrying out international letter of credit transactions using blockchain technology

Jun 01, 2017

June 1, 2017, Saint Petersburg – Sberbank and vertically integrated steel and steel-related mining company Severstal PJSC are developing cooperation in technological innovations. In particular, at the 21st Saint Petersburg International Economic Forum they announced a prototype that allows international letter of credit transactions to be performed using blockchain technology.

Using the prototype developed by Sberbank, the parties tested out issuing an international letter of credit (LoC) for a contract to deliver steel signed with one of Severstal’s Belarusian counterparties. Sberbank acted as the confirming bank. Sberbank’s subsidiary bank BPS-Sberbank was the issuing bank.

The project is unique because it involves carrying out a full-cycle international LoC transaction using blockchain – from the moment the LoC application is submitted to the provision of the set of documents for the LoC and tracking the document checking stage. All four participants completed actions using the system, and also monitored each other’s actions. Blockchain technology allows the time required to carry out such transactions to be considerably reduced and simultaneously increases transparency. This is the first solution of its kind developed in Eastern Europe.

Senior Vice President of Sberbank and Head of Sberbank CIB[1] Igor Bulantsev commented: “Sberbank was one of the first organisations to begin working on practical application of blockchain because we view it as a very promising technology, including for use in international letter of credit transactions. I am certain that the experience we gained when developing the prototype will help us take customer service to the next level and will be used in the construction of the Bank’s ecosystem.”

Deputy CEO of Severstal Management (the management company of Severstal) Alexey Kulichenko commented: “Severstal continuously studies new opportunities to develop business efficiency which arise as information technology develops. In the financial sector Blockchain technology simplifies document flow, makes processes more transparent, and helps cut costs and shorten deadlines – in this case for letter of credit transactions.”

[1] On the basis of JSC “Sberbank CIB”