Société Générale Issues Bonds on ETH Blockchain

The French financial services company Société Générale Group’s subsidiary, Société Générale SFH has issued around bonds worth €100 million (about $112 million) in the form of security tokens on Ethereum’s Blockchain. The announcement was made on the company’s website on April 23.

More Efficient Ways for Bond Insurance

This is Société Générale SFH’s first project and it was launched in collaboration with Société Générale FORGE, an internal startup that had been created and launched via the insurance giant’s intrapreneurial program called the Internal Startup Call.

According to the announcement, Société Générale used the OFH token (Obligations de Finacement de l’Habitat, which means Home Financing Obligations), which would represent covered bonds worth €100 million.

Covered bonds are a form of security that are backed by specific assets, however still remain on the bonds issuer’s balance sheet.

A report published on April 23 by Moody’s Investor Service, the bond rating agency, stated that Société Générale had been the only investor in this transaction. This means that the company issued the securities to itself and that no outside buyers or investors had been involved.

The company explained that this transaction had been made to look for more efficient ways to issue bonds that would also improve transparency, speed up transferability as well as settlements.

In its announcement, the company stated that this new product was proposing a new standard for bonds issuance as well as secondary market bonds trading. It would also reduce cost as well as the number of intermediaries in the process, said the company.

Société Générale FORGE was the company that designed this pilot, while the big-four professional services giant PwC was advising on the project, and French law firm Gide Loyrette Nouel acted as legal advisor.

Moody’s gave this pilot a credit positive, because of the increased transparency as well as the reduced chances of errors. Traditional bonds issuances are subject to a lot of errors due to the complexity of the process as well as the number of intermediaries involved.

Experiments in the Past

This is not the first time that Société Générale has experimented with Blockchain technology. In fact, the insurance giant has been involved in quite a few enterprise Blockchain-based projects.

The company was a founding member of we.trade, IBM’s trade finance platform, in 2017 and also of Komgo SA, the commodity trading platform, in 2018.

Earlier this month, Kleinwort Hambros, Société General’s private bank and wealth manager, announced that it had launched an ETN (exchange traded note) that would focus on investments in Blockchain companies.