‘More to follow’ first SDR bonds issuance


Legal experts expect more financial institutions to follow the lead of Standard Chartered Bank, which recently issued its bonds denominated in special drawing rights (SDR), the first such issuance by a commercial entity.

“As the SDR bonds are settled in renminbi, this is a differentiator in the marketplace,” Hwang Hwa Sim, a capital markets partner at Linklaters in Hong Kong and the lead partner in the issuance, told China Business Law Journal. “The issuance of these bonds demonstrates the central role the renminbi will increasingly play in our bond markets, and more broadly the global financial system.”

Hwang said the deal is a great example of using legal innovation to support increased financial integration between mainland China and international markets. “While these unique SDR bonds are the first such bonds issued by a commercial entity, we expect more will follow, given the pace of China’s financial integration with global markets.”

SDRs are an international reserve asset created by the International Monetary Fund. The value of the SDR is based on the US dollar, euro, Japanese yen, British pound, and, since 1 October 2016, the renminbi.

Sim said the SDR bonds were denominated in SDRs and settled in renminbi – a milestone transaction given that the renminbi was only recently included in the SDR basket – and mark another step on the road to the internationalization of the renminbi.

Legal counsel: Linklaters advised Standard Chartered Bank on the issuance, with its team led by Sim.