November 18, 2019 STOCK EXCHANGE - Luxembourg strengthened in the stability of the euro

The European Stability Mechanism celebrated the first issue of an obligation governed by Luxembourg law, replacing the British regime that had prevailed so far.

Brexit or not Brexit? The statement released Friday night by the Luxembourg Stock Exchange does not mention the upcoming exit of the United Kingdom from the EU, but the European Stability Mechanism (ESM) also needs legal predictability in issuing its bonds.

Obligations that were hitherto issued under British law. The decision was taken by the MES - whose head office is in Luxembourg - to pass since 1 October last under grand-ducal law for the issue of its bonds denominated in euros.

The first issue of a bond denominated in euros under this legal regime was celebrated on Friday 8 November. The 5-year 3.5 billion (0%) bond was listed on October 29 and was oversubscribed to $ 6.4 billion. This allowed ESM to meet its funding requirements for the fourth quarter.

"We welcome this change to Luxembourg law as a major recognition for the Luxembourg legal framework," said Robert Scharfe, CEO of the Luxembourg Stock Exchange, in a press release.

9.8 billion euros out of 2019

For its part, the ESM has received encouraging signals from banks and investors following this announcement. The ESM has already issued bonds on the Luxembourg Stock Exchange since 2012, reaching € 160 billion to help eurozone countries facing financial difficulties. In 2019, the ESM issued € 9.8 billion, making it the largest issuer of euro-denominated bonds in the euro zone.

Created in 2012 as a successor to the European Financial Stability Facility, the European Stability Mechanism (ESM) is part of the governance of the euro area to prevent its stability by providing assistance to countries facing or facing financial difficulties.

Written by Thierry Raizer - Paperjam

Posted on 11.11.2019