KASIKORNBANK (KBank) has worked with the Thai Bond Market Association (ThaiBMA) in launching 3-month debentures worth 17 million Euros which are being offered via blockchain under the Regulatory Sandbox Program. KBank is the first Thai commercial bank to offer such bonds via this innovative technology, with the aim of creating a prototype and setting a standard for the Thai bond market in the future.
Mr. Chongrak Rattanapian, Senior Executive Vice President, noted that in collaboration with ThaiBMA, KBank has issued and offered Euro-denominated debentures to domestic institutional investors via distributed ledger technology (DLT) or blockchain under the Regulatory Sandbox for Capital Market Innovation Development Program. KBank is the first Thai commercial bank to offer the foreign currency-denominated bonds under this program.
These debentures are unsubordinated and unsecured Euro-denominated bonds without debenture holders’ representative. Total issue size is 17,000,000 Euros, or 17,000 units, and tenor of the bonds is approximately 3 months, with an interest rate of 0.52 percent p.a. The debentures are rated F1+(tha), which is the highest rating granted by Fitch Rating (Thailand) Limited.
The issuance of these Euro-denominated debentures amounting to 17 million Euros is under the KBank debenture program worth not exceeding 30,000 million Baht approved by the Office of the Securities and Exchange Commission, as part of the medium-term notes program for a period of two years. The offer of these debentures is part of KBank’s preparedness in seeking funding sources in multiple forms to suit varied market circumstances and its business operations.
This bond offering differs from normal offerings as KBank has made use of innovations in the Thai capital market, adopting blockchain technology in the securities registration work in order to enhance market development. Registrar Service Platform Phase 1 (RSP1) of KBank and the Thai Bond Market Association (ThaiBMA) has been approved by the Office of the Securities and Exchange Commission to be included in the Regulatory Sandbox for Capital Market Innovation Development Program in support of capital market services. This technology, deemed the first phase of infrastructure development of the corporate bond market, is highly secure and flexible, and can support bond offerings in various forms and currencies.
Mr. Tada Phutthitada, ThaiBMA President, said the ThaiBMA was pleased with KBank’s success as the first Thai bank to employ blockchain technology in bond offering. This series of Euro-denominated bonds has been offered to several leading institutional investors in Thailand, all of which have expressed their intention to use the system under RSP1 with application of distributed ledger technology (DLT) or blockchain in creating a dataset of bondholders that is available to all players in the market.
The success of this project has been realized through the cooperation of related parties in the Thai bond market, for example, bond issuers, registrars, arrangers, representatives of bondholders and securities depository, all of which are determined to build up the primary market’s infrastructure to become a DLT Scriptless Corporate Bond Market. RSP1 will serve as the first move of a great leap in the Thai bond market, while KBank’s bond issuance and underwriting with blockchain technology will be the prototype for and standard of future development.
Mr. Thiti Tantikulanan, KBank’s Capital Markets Business Division Head, said that although the present economic and capital market situations have been seriously affected by the COVID-19 pandemic, this Euro-denominated bond offering of KBank worth EUR17 million has seen much interest from a number of leading Thai institutional investors, including funds managed by asset management companies and insurance companies. Such interest reflects investors’ confidence in KBank as a top Thai financial institution as well as blockchain technology developed by ThaiBMA under the Regulatory Sandbox Program in support of capital market services. In addition, these parties have shown their intent to participate in capital market development.
As an arranger for debenture offering, KBank attaches importance to both the debenture issuers and investors. KBank, as a debenture issuer, has gained direct experience from the current debenture offering, and this will provide KBank greater confidence in offering recommendations to other debenture issuers when KBank again becomes an arranger of bonds in the future. Concurrently, the use of blockchain will enable investors to accurately and quickly sell, verify and access data. KBank is, therefore, upbeat that the current debenture offering will be an important stepping stone for the Thai capital market in the digital era.
Mr. Silawat Santivisat, KBank Senior Executive Vice President, said that KBank is the world’s first commercial bank to have successfully developed the issuance of letter of guarantee (LG) via blockchain technology. The success represents an upgrade in the Bank’s internal operations, and KBank’s blockchain LG is presently part of the LG issuance standards in the Thai banking system. As KBank has always been involved in and placed importance on this system, we have capitalized on blockchain LG to develop other services, management processes and the issuance of debentures, too. As evidenced, this technology greatly benefits KBank and the overall banking system as market participants can immensely cut operating costs via efficient database and data security management, as well as data utilization. The use of blockchain for the issuance of debentures will not only help enhance the efficiency of related operations, but also offer convenience to those involved, including subscribers, debenture holders, registrars, and custodians, because they can access the data in real-time, cut costs and communication processes, and efficiently verify data, from the debentures’ offering date right to their maturing date.
The debt securities registrar has confidence in this blockchain technology, and has benefited from its capability in managing data, auditing, making inquiries and monitoring the activities of debenture holders with greater speed and accuracy. It can also be used to eliminate tasks that require manual completion, as the fundamental qualities of blockchain technology and smart contract ensure that data remains accurate and is highly secure. Related parties can quickly gain access to relevant information, making the processes convenient and facilitating the Thai bond market’s development in this digital era.
For custodians, the technology serves as a gateway connecting the present-day world of financial custodian services to the world of digital assets custody. This system allows debentures that are financial assets to be stored as digital assets, and opens the door to even more financial innovation, greater efficiency and reduced operating costs for custodians as well.