Saad Ullah
Covered Bonds on Ethereum
Societe Generale SFH, a subsidiary of SGG, announcedthat it has used Obligations de Financement de l’Habitat tokens (OFH, or home financing obligation) that represent USD 112 million in covered bonds. Covered bonds are type of a security, which although issued, still remains in the balance sheets of the issuing firm.
The value of USD 112 million (100 million in Euros, the issued currency) may seem a very big move, but as it is pointed out by Moody’s, a reputed bond rating agency, the bonds seem to be invested on by the Societe Generale SFH itself. In other words, the financial firm simply issued the bonds and bought them itself.
Although an internal trade, the bonds are bear all the characteristics of traditional ones. They have a 5 year maturity life with a 12 month extension possibility. Moody’s point out that the bonds are at par with others, “on equal footing”. Were Societe Generale SFH to fail, holders of the OFH coins will be paid as any regular bond holder.
Moody’s: Credit Positive
Moody’s has declared the move a credit positive one. The agency considers adoption of blockchain technology a very positive development, since the transparency characteristics mean a more open ledger, allows for greater scrutiny and reduces chances of error due to elimination of middlemen and undue processing.
The blockchain move was designed by another subsidiary of Societe Generale, Societe Generale FORGE. FORGE was formed specifically to look into blockchain development and adoption for the financial firm. The Forge was “one of the 60 internal startups launched via the Internal Startup Call, the Group’s intrapreneurial programme,” according to the company.
PwC, a professional service company was on board the development as a technical advisor, along with Gide Loyrette Nouel, a French law company as the legal one. The SGG was very positive on the use of blockchain and said,
Many areas of added value are predicted, among which, product scalability and reduced time to market, computer code automation structuring, thus 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.
In the past few years, the number of financial instotutions that are considering, or have started using blockchain has boomed. Although many traditional financial powerhouses see cryptocurrencies as a fad, they have come to admit that the technology behind them, blockchain, has benefits. Less than a year ago, IBM had released as study that clearly showed rising trends towards blockchain and cryptocurrency by financial institutions around the world.
Saad Ullah
