The European Financial Stability Facility (EFSF), created in May 2010, carried out a bond issue on 25 January in favour of Ireland for Société Générale was joint bookrunner. Zeina Bignier, Head of Sovereign and Public Sector Origination for Société Générale Corporate & Investment Banking tells us more about this transaction and the EFSF’s goals.

Zeina, can you explain what the European Financial Stability Facility (EFSF) is and its key aims?
Zeina Bignier: The European Financial Stability Facility (EFSF) is a company agreed upon by the 16 member states of the eurozone in May 2010 and is headquartered in Luxemburg.  Its Chief Executive Officer is Klaus Regling.  Its objective is to preserve the financial stability of Europe’s economic and monetary union by providing financial assistance to euro area member states in difficulty.  The EFSF is part of a wider move by Europe’s institutions to implement new financial crisis management mechanisms within Europe.  Overall the European Stabilisation Mechanism (ESM) comprises three lending facilities: the European Financial Stability Facility (EFSF), the European Financial Stability Mechanism (EFSM) and the International Monetary Fund (IMF) each supporting the system to provide a total funding capacity of 750 billion Euros.

In what way does Société Générale play a part in the financial assistance programme for Europe?
ZB: In order to raise the funds and thereby provide loans to countries in financial difficulties, the EFSF borrows by issuing bonds on the market.  This is where Société Générale comes in by providing access to that market.  Societe Generale - alongside Citi and HSBC - was a bookrunner for the EFSF’s recent bond for an amount of 5 billion euros as part of the financial support package for Ireland.  As a joint-bookrunner, Société Générale markets the transaction to its diverse investor base, prices the deal and runs the “book” as the orders from investors around the world are placed.   In a 15-minute time lapse the order books were filled with investor demand reaching almost 45 billion Euros for a final take of 5 billion euros.

Is this a vote of confidence for Europe and its new financial safety nets?
ZB: Indeed a vote of confidence. Investor demand was record breaking.  The order amounts show the ability to raise funds in this market and in Europe’s ability to face current and future crises.  Interest came from around the world notably from Asia, Germany and the UK to mention the largest areas.  Generally, it shows confidence both within Europe and internationally in the euro as a credible currency which is here to stay. The demand from central banks was high (43% of the total amount) which equally confirms the euro as a reserve currency.  

The success of this transaction certainly reflects confidence in Europe and in the European Stability Mechanism.  It demonstrates that the new financial crisis management mechanisms are in place and fulfilling their aim. 

Going forward the ESM may undergo some reforms which will be discussed at the European Union Summit in March in order to ensure its efficiency as a permanent structure, with strengthened governance and increased funding capabilities in order to continue to fulfill its mission as an aid fund.

Does the future of Europe’s financial stability lie in cooperation?
ZB: The European Stabilisation Mechanism (ESM) could be considered as one step towards building a future centralised facility which will take over from individual European issuers who find it difficult to access the bond market. The ESM will help lead towards the harmonisation of European budgetary policies and greater convergence close to what was initially laid out in the Maastricht Stability Pact in 1993.

Société Générale will continue to support its clients and the economies of Europe on the road towards achieving European financial stability.