Standard Bank raises $124.8 million to cover financial loss

Standard Bank South Africa (SBSA), a unit of Africa’s largest bank by assets Standard Bank Group, has raised more than R2 billion ($124.8 million) through its first issue of financial loss-absorbing capacity notes, known as FLAC.

The instrument is designed to shield the public purse if a bank runs into trouble. Instead of leaning on taxpayer-funded rescues, regulators can require shareholders and certain creditors to absorb losses.

Shift to new benchmark rates

South Africa’s Prudential Authority introduced the framework in December 2023, directing banks to build an additional layer of capital in the form of FLAC. The move gives resolution authorities the power to write down debt or convert it into equity if a lender falters. 

The rules reflect lessons from the 2007-2009 global financial crisis, when governments around the world were forced to step in to prop up lenders once viewed as too big to fail.

Taxpayers carried much of that burden, deepening pressure on public finances and shaking trust in the financial system. 

In response, the Financial Stability Board set global standards requiring major banks to hold instruments that can absorb losses in times of stress.

South Africa’s framework mirrors those standards, aiming to stabilize troubled institutions without direct state support. 

Standard Bank said the FLAC notes will strengthen the resilience of its balance sheet and the broader financial system. In a stress scenario, authorities could reduce the value of the notes or convert them into shares, helping the bank recapitalize quickly.

Standard Bank launches ZARONIA notes

The issuance also marks another first. Standard Bank was the first local lender to offer floating-rate notes linked to the South African Rand Overnight Index Average, or ZARONIA, in a public auction. 

ZARONIA is replacing the Johannesburg Interbank Average Rate, or JIBAR, which is set to be discontinued at the end of 2026.

The transition aligns South Africa with global efforts to move from interbank offered rates to overnight benchmarks that are seen as more transparent and transaction-based. 

In a statement, the bank said the FLAC issuance and the adoption of ZARONIA-linked notes reflect changes in how it funds its operations, shifting away from older benchmark systems toward instruments that meet new regulatory standards. 

Standard Bank upgrades services

Standard Bank of South Africa Ltd., headquartered in Johannesburg, serves retail, business and corporate clients with products ranging from home loans and vehicle finance to wealth and asset management. 

The bank has also invested R1 billion ($62.4 million) in its Online Banking for Business platform, part of a broader effort to upgrade digital services for commercial clients. 

David Hodnett, who became chief executive of Standard Bank of South Africa in October 2025, joined the group in 2019 as chief risk officer. With more than three decades in financial services, he now oversees the lender as it adapts to tighter capital rules and a changing rate environment.