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French investment banking giant Societe Generale has announced that it has issued the first covered bond as a security token on a public blockchain.
Covered bonds are debt securities issued by a financial institution and collateralized against a pool of assets. In case the financial institution becomes insolvent, the bond is covered.
In a press release dated April 23, the bank said that its subsidiary Societe Generale SFH issued EUR 100m of covered bonds (obligations de financement de l’habitat or “OFH”) as a security token, directly registered on the Ethereum blockchain on April 18.
OFH Tokens have been rated Aaa / AAA by Moody’s and Fitch and have been fully subscribed by Societe Generale, the release said.
This marks the first pilot project developed by Societe Generale and Societe Generale FORGE, an internal startup launched via the Internal Startup Call, an intrapreneurship programme launched by Societe Generale in 2017. The startup explores various blockchain-based business solutions to develop new digital capital market activities.
Societe Generale said the live transaction explored a “more efficient process” for bond issuances and sees the possibility for many areas of added value such as product scalability and reduced time to market, computer code automation structuring, thereby facilitating better transparency, faster transferability and settlement.
“It proposes a new standard for issuances and secondary market bond trading and reduces cost and the number of intermediaries,” it added.
For the project, Gide Loyrette Nouel was appointed as legal advisor to the OFH Token issuer and PwC France and francophone Africa was involved as blockchain advisor.
Societe Generale has been actively involved in a number of blockchain initiatives. This includes we.trade, the first blockchain-based trade finance platform now available to all its corporate clients in France, and komgo SA which aims to digitalise the trade and commodities finance sector through a blockchain based open platform.
