It has being one of the most important news in the industry for the past couple of weeks. On 18 April 2019 Société Générale SFH, a subsidiary of Société Générale Group, issued €100m of covered bonds as a security token, directly registered on the Ethereum Blockchain. It is important to note though that, according to a report published by Moody’s, Société Générale was “the sole investor,” meaning the firm issued the securities to itself and no outside buyers were involved.
Although still deemed as a pilot it is important to note that this transaction brings much needed benefits to the bond-issuing use case especially reduction of completion times and time to market being transparency and faster transferability and settlement intrinsic characteristics of having used DLT as the underlying technology.
One important thing to highlight is that Moody's considers the use of Blockchain technology “credit positive” for the issuer, in part because of increased transparency and a reduced likelihood of errors “arising from the complexity and the number of intermediaries involved in issuing covered bonds using traditional means.” showing again the good momentum that Blockchain and DLT are going through at the moment.
As innovative and important for the industry as it is that Société Générale, a Tier 1 Bank in the Eurozone, is investing in DLT as a way to streamline their processes it is mandatory to mention that spanish BBVA issued world-first blockchain-based syndicated loan arrangement with Red Eléctrica Corporación in November 2018 for €150m. This was a significantly more difficult process as BNP Paribas and MUFG where also part of the process acting as counterparts.
Then again in December 2018 BBVA and Porsche Holding Salzburg, the largest and most successful automotive distributor in Europe and a subsidiary of Volkswagen AG, closed a €150 million term loan backing strategic acquisitions in the retail distribution network in Europe and Asia and more recently, in April 2019, BBVA and Madrid’s government closed the first blockchain-powered sustainable “Schuldschein” loan worth €220 million.
All in all, this is another example of putting Blockchain and DLT at use to solve real issues in real work environments and players finding real value through the process.
Moody's considers the use of Blockchain technology “credit positive” for the issuer, in part because of increased transparency and a reduced likelihood of errors