Investec takes first step toward R30bn Flac target

Investec became the latest South African bank to issue loss-absorbing debt as local lenders work to comply with the new central bank framework.

Its South Africa unit has issued R700 million ($43 million) through the new instruments that are known as funding for loss-absorbing capacity, or FLAC, notes.

They have a legal maturity of six years but are redeemable after five at Investec’s election, the lender said.

The notes were issued via private placements with South African institutional investors, Investec South Africa Treasurer Laurence Adams said in response to questions from Bloomberg.

The issue was benchmarked to Zaronia, the reference rate for short-term financial contracts that the central bank is introducing to replace the Johannesburg interbank average rate by year-end.

The issuance forms part of South Africa’s new regime that requires systemically important lenders to build a buffer of debt that can be written down or converted to equity if