JOHANNESBURG, Feb 19 – Standard Bank Group has raised 2 billion rand ($123.76 million) through the continent’s first issuance of financial loss-absorbing capacity (FLAC) bonds, marking a major milestone in strengthening Africa’s financial system against potential banking crises.
FLAC bonds are designed to absorb losses during periods of financial distress. The instruments can be written down or converted into equity if a bank faces severe financial pressure, allowing authorities to stabilise lenders without relying on taxpayer-funded bailouts.
The issuance attracted strong investor demand, with bids exceeding 10 billion rand from more than 30 institutional investors. The transaction was structured across four tranches, reflecting broad market confidence in both the instrument and the bank’s credit profile.
Paul Burgoyne, Head of Treasury and Money Market at Standard Bank, described the issuance as the result of years of regulatory preparation, legal structuring, and investor engagement aimed at aligning South Africa’s banking framework with global financial stability standards.
The structure mirrors international regulatory reforms led by the Financial Stability Board, which introduced loss-absorbing capital standards to ensure shareholders and investors, rather than taxpayers, bear the costs of bank failures.
South Africa’s resolution framework, implemented in 2023, provides the legal foundation for such instruments. Credit rating agency Moody’s said the framework strengthens protections for depositors and senior creditors while reducing the likelihood of government-funded rescues.
The introduction of FLAC bonds marks a significant evolution in Africa’s financial architecture, reinforcing the resilience of its banking sector and aligning it more closely with global best practices in crisis management.