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We're proud to announce that BondEvalue has won the <a href="https://www.ubs.com/microsites/future-of-finance-challenge/en/finalists.html#tab-511736288">UBS Future of Finance Challenge - Reimagining Investing Category</a>, for our proposal and pitch on the BondbloX Bond Exchange! We are honored to have been awarded first place in our category out of 475 submissions, 5 launch events, and 10 finalists from some of the most innovative companies.We are looking forward to reimagining bond investing, and to be a part of the future of finance with the UBS team.A huge thank you to our mentors <a href="https://www.linkedin.com/in/ACoAAAQ-ojkBi2OobUil_I1p6a1IOFafgsqyqd4">Kishore K.</a>, <a href="https://www.linkedin.com/in/ACoAAAA0-wwB1TmKkyor9BIMw_8euP_kkd1c86Q">Ash Tong</a>, <a href="https://www.linkedin.com/in/ACoAABDs3akBxcq552puaL3p_Ki8h-oD9XfMJwc">Dario de Wet</a> for their superb feedback during our mentoring sessions, our investors, advisors for enabling us to make our vision into a reality, and to the team for their continued efforts in bringing bond investing to all at any size, anytime and anywhere.&nbsp;Since 2015, the UBS Future of Finance Challenge has been open to start-ups and established, growing companies that change the way finance works and meets the client needs of the future. The 2021 competition was delivered in collaboration with Anthemis, Deloitte and Microsoft for Startups.

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BondEvalue has won the UBS Future of Finance Challenge - Reimagining Investing Category, for our proposal and pitch on the BondbloX Bond Exchange

BondEvalue wins the UBS Future of Finance Challenge 2021

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Singapore-based fintech BondEvalue has raised US$6 million in its Series A round of fund raising, with MassMutual Ventures Southeast Asia and Citigroup among the new investors. Both institutions are expected to be represented on the board.The latest round brings the total raised by the company to US$10 million and affirms investor confidence as its digital exchange for trading fractionalised bonds continues to gain momentum.Other investors included existing shareholders Potato Productions, a company helmed by entrepreneur Lee Han Shih, and Octava, a Singapore-based family office.BondEvalue was established in 2016 to provide electronic bond trading and to make bond investments accessible to a wider group of individual investors. Last October, it received a Recognised Market Operator (RMO) approval from the Monetary Authority of Singapore to operate BondbloX Bond Exchange, the world’s first fractional bond exchange.The company’s proprietary technology and enterprise-grade blockchain enables BondbloX investors to buy and sell bonds in denominations of US$1,000 instead of the usual US$200,000, and through a public exchange where prices are highly transparent.BondEvalue Co-Founder and CEO Rahul Banerjee said: “Citi and MassMutual are behemoths in the bond market. Their support of our vision to have a transparent bond market will accelerate our momentum.”“We are excited about the future and are focused on executing our mission of bringing bond investing to the so-called HENRYs (High earners, not rich yet), who hitherto were unable to buy bonds.”BondEvalue will use the proceeds to increase its international members. It also announced its joint venture (JV) in Mexico that is headed by Mr. Jaime Zenizo, previously head trader for HSBC Mexico. The JV will form a Peso bond exchange and represents the first local currency expansion by BondEvalue.Anvesh Ramineni, Managing Director at MassMutual Ventures, said: “Investing in corporate bonds has typically been out of reach for most retail investors in Asia. BondEvalue is changing that by bringing greater transparency and democratising access to the fixed income asset class.&nbsp; We are very excited to partner with Rahul and the BondEvalue team and look forward to supporting them on their journey.”Chris Cox, Global Head of Data and Digitisation and Strategic Projects, and EMEA Head of Securities Services at Citi, said: “We are delighted to close our investment in BondEvalue.&nbsp; Alongside Northern Trust, Citi will join the BondbloX Bond Exchange as an asset servicing provider and as a strategic partner to the BondEvalue ecosystem. We are excited about the prospect of digitalisation of traditional assets and to be part of that journey with BondEvalue.”Deepak Mehra, Citi’s Asia Head of Strategic FinTech Investments and Electronification, added, “The trend towards electronification of bonds markets is accelerating. We are excited about our strategic investment in BondEvalue as it fits with our focus on working with category champions in the Asia-Pacific innovation ecosystem.“Citi’s Strategic FinTech Investments programme seeks to invest in highly innovative companies with the potential to transform the industry over the medium-to-long term while helping our investee companies leverage Citi’s product expertise, deep client relationships and unparalleled global network to realize their vision.”For more information on the BondbloX Bond Exchange, please visit <a href="http://www.bondevalue.com/">www.bondevalue.com</a>.<h4>About MassMutual Ventures:</h4>MassMutual Ventures (MMV) is a multistage global venture capital firm investing in enterprise software, cybersecurity, financial technology, and digital health companies. With deep expertise and an extensive Fortune 500 network, MMV helps entrepreneurs build compelling and scalable companies of value. MMV has offices in Boston and Singapore, with $450 million under management. For more information, visit <a href="http://www.massmutualventures.com/">www.massmutualventures.com</a>.<h4>About Citi:</h4>Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

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BondEvalue has raised US$6 million in its Series A round of fundraising, with MassMutual Ventures Southeast Asia and Citi among the new investors. Both institutions are expected to be represented on the board.

BondEvalue raises US$6 million in Series A round led by MassMutual Ventures and Citigroup

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Fractional bonds will now be available on the FinIQ platform. Banks and financial institutions which use FinIQ would have direct access to the BondbloX Bond Exchange (BBX). This would enable these banks to trade fixed income live on an instant atomic settlement basis on BBX. Banks can also offer direct access to their wealth clients for fixed income trades as they have been so for structured notes on the FinIQ platform.Shodhan Shah, director of FinIQ, commented "Our partnership with BondEvalue further bolsters our core offering of providing a front-to-back platform for wealth managers which digitizes, sales and distribution processes. We see increased demand for digital bonds from our clients.""A step towards the digitalisation, democratisation and direct access to bond investment. This takes us closer to our goal of allowing every equity investor to also buy bonds," said Rajesh Johar, Co-founder of BondEvalue."We are excited to join hands with FinIQ in our journey to democratise trading bonds. About 40 banks and venues use FinIQ's open architecture, to provide live quotes and express order capture at a button's click for various financial products. Using bondblox, private banks would be able to offer more personalized and differentiated bond portfolios."About BondevalueThe BondbloX Bond Exchange ("BBX") is the world's first fractional bond exchange launched by BondEvalue. Regulated as a Recognised Market Operator by the Monetary Authority of Singapore, BondEvalue transforms the bond market by enabling investors to conduct electronic bond trading of fractional bonds ("BondbloX") via partner banks and brokers. BBX has integrated with global custodians Northern Trust and Citibank.As an exchange, settlement is atomic, prices are fully transparent, and execution is on a Central-Limit-Order Book. BondEvalue's proprietary technology and enterprise-grade blockchain enable investors to buy and sell bonds in denominations of SGD/US$1,000 instead of the usual SGD 250,000/US$200,000.About FinIQFinIQ is a Singapore-based capital markets technology provider. Established in 2001, FinIQ today caters to order management, best execution, compliance, suitability, documentation, valuation and post-trade life cycle requirements of over 40 financial institutions.The platform is used by nearly 15,000 bankers across 21 countries to electronically trade financial instruments including derivatives, structured products, swaps, funds, bonds, cash equity and cash FX. Direct to Client apps and APIs are also offered in addition to the enterprise platform.

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Fractional bonds are now made available on the FinIQ platform, where banks and financial institutions which use FinIQ would have direct access to the BondbloX Bond Exchange (BBX).

BondEvalue and FinIQ sign MOU to offer fractional bonds

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New Member Onboarded

We are delighted to announce that GFM Asset Management has joined BondbloX Bond Exchange as our newest member!We are also excited to share that GFM is our first member based out of Hong Kong!GFM is a Hong Kong-based provider of wealth management services for professional global citizens and their multinational families.&nbsp;Initially focused on serving American clients with US IRA, 401k, and 529 accounts, GFM now serves high net worth and pre high net worth individuals in over a dozen countries around the world with a full suite of wealth management services and a passionate interest in evaluating individual stock opportunities.GFM co-Founder Tariq Dennison TEP is also a renowned speaker and lecturer on fixed income, ETFs and alternative investments, and uses the BondbloX platform to build better balanced bond ladders for non-US clients.Find out more on: <a href="https://gfmasset.com/">https://gfmasset.com</a>/

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GFM Asset Management has joined BondbloX Bond Exchange as our newest member!

GFM Asset Management joins BondbloX Bond Exchange

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<h4>Introduction</h4>Fractionalization has captured the imagination of the investing public. The promise is simple - everyone can buy anything. Fractional assets like stock or BondbloX allow anyone to buy a slice of an Apple share even if they don’t have or want to spend the $147 odd that it is currently trading at, or a fraction of the HSBC 6% bond, that is currently available at a minimum investment size (denomination) of $200,000. Fractionalization powers compossibility, which is the ability to create or compose a customized portfolio for each investor. Let’s say that a wealthy investor currently wishes to invest $1 million in Asian bonds. With the $200,000 minimum denomination, their portfolio can only have five bonds, which would make it concentrated. The other option is to put the money in a fund but then you lose the customization. If a private bank or an independent financial advisor wishes to do both diversification and customization, then you need fractionalization. The other big trend being observed is the rise of self-directed investors who trade on online brokerages, which are attracting millions of first-time investors. Many of them like to dip their toes first (invest smaller amounts) and therefore tend to like fractional assets.<h4>How was it done in the past and what are the risks</h4>Fractionalization per se is not new. Pass-through notes have existed for decades. These involve the creation of a special purpose vehicle (SPV) which acquires the assets and then issues the fractional notes. The main disadvantage is that these SPVs are quite often located in offshore tax havens and in the days of the Panama or Pandora papers, keep coming up for scrutiny for their lack of transparency. Less inflammatory but equally worrisome is that they often have many layers of accountants, fund administrators etc. that need to work together to achieve the desired outcome. Such structures typically have a sponsor and only the sponsor makes markets or otherwise sell these notes. This makes them even more illiquid.A broker can also do a simple fractionalization wherein it buys on its balance sheet and sells the pay-off to its clients. The on-balance sheet exposes the buyer to default risk of the broker. Unlike during the Lehman Brothers default saga , buyers generally understand this risk in a much better way today.The modern method of doing fractionalization is with the use of Distributed Ledger Technology (DLT). This method is used by BondbloX and results in the creation of Bond Depository Receipts (BDR). The original full-sized bonds are kept (lock-boxed) with a designated custodian and then the notes are issued by an exchange (un-sponsored) or by the original issuer for raising new money (sponsored). This structure has been in use for many years across the equity markets. In the USA, this structure is called an American Depository Receipt (ADR) (<a href="https://www.sec.gov/investor/alerts/adr-bulletin.pdf">SEC, 2012</a>). While the focus of ADR was to change the currency of the issuance, it also had a fractionalization / aggregation feature to get a meaningful nominal share price.Legally, this structure has been around for a long time. DLT further increases its transparency and reduces both the time and cost for the issuance of the depository receipt. In the new international financial services centre (IFSC) at Gift City, India’s NSE plans to use the un-sponsored DR structure to create liquidity in US stocks for Indian retail investors (<a href="https://www.business-standard.com/article/markets/nse-to-start-trading-in-us-stocks-at-gift-city-list-of-scrips-not-yet-out-121080901677_1.html">Business Standard, 2021</a>).Another major benefit of fractionalization of assets such as bonds with high minimum denominations is the ability for the investor to now create a diversified portfolio with a much lower capital. A minimum trading lot of $1,000 can help an investor build a reasonably well-diversified portfolio with as little as $10,000 and a very well-diversified portfolio with $50,000. This kind of diversification significantly reduces the concentration risk in a portfolio especially with bonds where more focus tends to be on the return OF principal rather than return ON principal. It also improves access to markets that are traditionally not available for all investor types, thereby furthering the democratising of financial markets.Investors with some risk appetite can set-aside small amounts to invest in BondbloX trading at discounts. This should generate a decent capital upside apart from a rich return by way of coupon payment. There are always such opportunities in the fixed income market. Fractionalization allows investors to take smaller bets which they would otherwise not.Four Tests For Perfect Fractionalization• Uniform claim: The claim under the fractional assets should be as per the formula Fractional claim = Value of Asset / Number of fractions. The only thing in the asset that can’t be fractionalized is the voting rights. These rights should then not be sold away.• Bare trusts should be used to convey the rights from the original asset to the fraction• Every entity in the fractionalizing process such as the custodian banks and the issuing exchange should be a regulated financial institution. The entire process should be in the public domain and the entities involved should not take principal positions in the assets, so that there is no conflict of interest.• Dual Fungibility should exist between the original assets and the fractional assets. While this dual fungibility is a must, it is also ideal that the fungibility happens without economic friction i.e. at zero cost and zero time.Lastly, I leave you with a conundrum, it holds to common wisdom that all told, the fractional asset will be more expensive than the full asset. For example, a piece of sashimi is more expensive per gram than buying the full Tuna. However, financial assets can sometimes behave counter-intuitively if the fractions bring in a new source of demand. This was the original reason of the ADRs. Other reasons or circumstances which may create this is if the demand goes up after fractionalization. Most CFOs with the notable exception of the Berkshire Hathaway shares (currently at $427,700 apiece), keep doing splits to keep the nominal price in balance. In the bond market with the lack of dealer inventory (where buyers can’t buy and sellers can’t sell), the increase in the number of investors are likely to provide a strong improvement in the market efficiency.To conclude, DLT and the depository receipt structure follow a transparent and market-based mechanism to fractionalize assets. Dual fungibility ensures that the additional liquidity is additive and complements extant liquidity. Let everyone buy anything!<h4>References</h4>Modak, Samie (2021, August 10). NSE to start trading in US stocks at Gift City, list of scrips not yet out. Business Standard. Retrieved October 15, 2021, from <a href="https://www.business-standard.com/article/markets/nse-to-start-trading-in-us-stocks-at-gift-city-list-of-scrips-not-yet-out-121080901677_1.html">https://www.business-standard.com/article/markets/nse-to-start-trading-in-us-stocks-at-gift-city-list-of-scrips-not-yet-out-121080901677_1.html</a>OECD (2020). The Tokenisation of Assets and Potential Implications for Financial Markets, OECD Blockchain Policy Series. Retrieved October 15, 2021, from <a href="https://www.oecd.org/finance/The-Tokenisation-of-Assets-and-Potential-Implications-for-Financial-Markets.pdf">https://www.oecd.org/finance/The-Tokenisation-of-Assets-and-Potential-Implications-for-Financial-Markets.pdf</a>SEC (2012, August). American Depository Receipts, SEC Investor Bulletin. Retrieved October 15, 2021, from <a href="https://www.sec.gov/investor/alerts/adr-bulletin.pdf">https://www.sec.gov/investor/alerts/adr-bulletin.pdf</a>Woo. G., &amp; Thiel, S. (2020, December 1). Fractionalizing the future of asset ownership, securely. Nasdaq. Retrieved October 15, 2021, from <a href="https://www.nasdaq.com/articles/fractionalizing-the-future-of-asset-ownership-securely-2020-12-01">https://www.nasdaq.com/articles/fractionalizing-the-future-of-asset-ownership-securely-2020-12-01</a>.

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Fractionalization has captured the imagination of the investing public. The promise is simple - everyone can buy anything. The BondbloX Bond Exchange is the world’s first fractional bond exchange, allowing investors to buy and sell bonds in denominations of SGD/US$1,000 000 instead of the usual SGD 250,000/US$200,000, providing significant diversification opportunities. The article elaborates on the advantages fractionalization brings and how bonds are fractionalized using distributed ledger technology at the BondbloX Bond Exchange.

Honey, I shrunk the bonds! But you can funge them back again!

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<h4>What is BondbloX?</h4>BondbloX represents fractional bonds traded on the BondbloX exchange, and contains fractional interests in the Underlying Bond.Conceptually, BondbloX works exactly like American Depositary Receipts (ADRs) or Global Depository Receipts (GDRs) where an issuer, in this case, BondEvalue Pte. Ltd (a Recognized Market Operator under the Monetary Authority of Singapore), re-lists the original bond (Underlying Bond) onto an exchange in a smaller minimum denomination, thereby allowing it to be traded in fractional sizes.The BondbloX created works using simple pass-through mechanics where the beneficial entitlements to the Underlying Bonds are conferred to the BondbloX holder, based on the fractional size held.<h4>BondbloX Exchange</h4>Structurally, BondbloX exchange works entirely different from traditional bond markets, as it uses an exchange model for all-to-all order matching. This contrasts the over-the-counter model that currently exists with phone dealers servicing individual investors.Settlement also happens instantaneously on blockchain and participants on the blockchain do not face the usual T+2 or T+3 settlement cycles when trading BondbloX.By changing the order flows, order matching processes and allowing BondbloX to trade electronically on an exchange model, we have a great efficiency advantage over the current human-dependent over-the-counter model. All these cost savings translate into better prices and lower fees.<h4>Converting Bonds to BondbloX (and back to bonds)</h4>The BondbloX Exchange, like any other exchange, lists eligible instruments that can be traded on it. The curation of the bond universe is jointly performed by the exchange, its members and market makers, to carefully bring diversification opportunities to investors in terms of industry, tenor, ratings, and also a decent yield pick-up.For any listed BondbloX, investors may deposit with the exchange the Underlying Bond. This will be custodised and safeguarded by one of our Designated Custodians, Citibank N.A., or The Northern Trust Company. Once deposited, the equivalent holdings will be converted to BondbloX and credited to the sender’s BondbloX account, making it available to trade.BondbloX is also dual-fungible, i.e. conversion back to the Underlying Bond is also possible. Investors holding sufficient BondbloX holdings meeting the minimum denomination may choose to convert their BondbloX into Underlying Bonds and have it sent back to their own custodians.<h4>Record of Ownership of BondbloX</h4>Ownership of BondbloX is recorded on blockchain and the blockchain is maintained by multiple parties (including our Designated Custodians) each deploying nodes to run consensus that together share the same data.&nbsp;The debentures register maintained on blockchain provides the definitive record of BondbloX ownership. Blockchain maintains data in an immutable fashion where every transaction is recorded and cannot be altered without other parties knowing.

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An overview of what is BondbloX, how the BondbloX Bond exchange works, how bonds are converted to BondbloX and how the record of ownership of BondbloX is done. 

How it Works

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This article was originally published on&nbsp;<a href="https://www.hyperledger.org/learn/publications/bondevalue-case-study">Hyperledger</a>.As many industries struggled to find their footing amid the aggressive headwinds caused by the COVID-19 pandemic, the global bond market has managed to thrive.With near-zero interest rates implemented worldwide to ease the financial burdens caused by the coronavirus, the demand for bonds soared with global bond issuances increasing 16% in 2020, according to <a href="https://www.spglobal.com/ratings/en/research/articles/201026-credit-trends-global-financing-conditions-bond-issuance-is-expected-to-finish-2020-up-16-and-decline-in-20-11708610#:~:text=Global%20new%20bond%20issuance%20through,the%20same%20period%20in%202019.">S&amp;P Global</a>. By the third quarter of 2020, the <a href="https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/Secondary-Markets/bond-market-size/">International Capital Market Association</a> valued the international bond market at a whopping $128.3 trillion.But for those interested in investing in international bonds, the bond markets in Asia and Europe are particularly hard to break into for two reasons: high investment thresholds and lack of electronic infrastructure.In the international bond markets, the minimum investment is $200,000. “This makes it inaccessible for even fairly wealthy people,” says Rajaram Kannan, co-founder and CTO of <a href="https://bondevalue.com/">BondEvalue</a>, a Singapore-based fintech company that focuses on Asian bond markets. Typically, only those who have $5 million or above can afford to diversify their portfolio, and they pour about one-third of their wealth into bonds.But there are roughly 500 million people who are categorized as “HENRY”-s, or high earners not rich yet, who have assets that range from $100,000 to $1 million. This new class of investors is eager to expand their portfolio, yet they find the bond market impenetrable because of the high barrier to entry. “As a result, the liquidity in the bond markets is not even comparable to where the other capital markets are,” says Kannan. “The opportunity for growth is immense.”Even when investors have the means to invest in the bond market, managing bonds can also be a challenge. “One of the pain points in the bond markets is that the trading still happens over phone calls,” explains Kannan. “If you’re a bond investor who wants to buy or sell bonds, you have to call up your relationship manager in your bank or brokerage and go from there. The workflows are not entirely electronic.” Another pain point in the bond market is the extra costs that accrue because of the number of intermediaries involved between the end investor and the actual market. Everyone takes their cut.Until now! The team at BondEvalue recognized the need to upend the global bond market and create a modern infrastructure that makes managing bonds faster, more accessible, and more technologically advanced.“At BondEvalue, our vision was a solution where investors can actually trade bonds on the go from a brokerage app just like they can trade in equity,” says Kannan.In November 2019, BondEvalue launched the <a href="https://www.bondblox.com/">BondbloX Bond Exchange</a>, replacing the traditional over-the-counter trading experience with the world’s first fully regulated blockchain-based bond exchange that allows consumers to instantaneously and transparently trade bonds in smaller denominations of $1,000 each.Fully licensed and <a href="https://thefintechtimes.com/bondevalue-approved-by-monetary-authority-of-singapore-to-operate-blockchain-based-bond-exchange/">regulated by the Monetary Authority of Singapore</a> as a Recognized Market Operator, the BondbloX Bond Exchange operates under a strategic partnership with <a href="https://www.northerntrust.com/united-states/pr/2019/northern-trust-bondevalue-fractionalised-bond-ownership-blockchain">Northern Trust</a>, which is the global custodian partner for the exchange. Together they deliver integrated asset servicing and digital ownership of fractionalized fixed income bonds on a permissioned blockchain network. And from the beginning, the BondbloX Bond Exchange has attracted powerful players in the financial sphere who have signed on as launch partners such as <a href="https://bondevalue.com/news/the-bondblox-bond-exchange-goes-live/">UOB Kay Hian</a>, one of the largest brokerage firms in Singapore.“Asian bonds remain attractive to local and regional investors despite the global uncertainty and market downturn, and we are confident that this partnership will provide customers access to new sources of returns and opportunities to build a more diversified portfolio,” says Wilhem Lee, Senior Executive Director at UOB Kay Hian.“We believe BondbloX will be an industry game changer,” says BondEvalue founder and CEO Rahul Banerjee. “Once investors have experienced BondbloX, they will take to online bond trading with the same fervor they do for equity trading.”<h4>Powering the “Beast” with Hyperledger Sawtooth</h4>“Exchanges are like big tech animals,” says Kannan. “They are beasts.”The BondEvalue team realized the only way to feed this beast and build an innovative, groundbreaking global bond exchange would be to deploy <a href="https://www.hyperledger.org/use/sawtooth">Hyperledger Sawtooth</a>, the open-source blockchain framework hosted by the <a href="https://www.linuxfoundation.org/">Linux Foundation</a>. As a modular and flexible architecture, Hyperledger Sawtooth allows developers to separate the core system from the application domain so smart contracts can specify the business rules for applications without needing to know the underlying design of the core system.“We are in the space where we need to own and build our own tech,” says Kannan. “And we have to give credit to the Hyperledger community and to the Linux Foundation for creating this framework and making our solution possible.”Thanks to Sawtooth’s model, which uses a single node type, “the deployment is fairly simple. Even if somebody doesn’t host a node, it’s quite easy for anyone to sign and submit their transactions,” says Kannan. “If a bank already has a trading app and wants to connect to the BondbloX Bond Exchange, it is relatively easy using contemporary REST or Websocket APIs.”Sawtooth also has rich support for standard and custom events, which helped to develop the distributed apps using an event-driven framework. Further, the permissioning framework was a great fit for creating a broad but closed network of approved participants.Finally, the Practical Byzantine Fault Tolerance is “the perfect consensus” for the BondbloX Bond Exchange. “The reason for using blockchain is to create a trusted network, and we wanted the right protocol that allows for that,” says Kannan.A Sawtooth PBFT network is permissioned and only an administrator can add or remove nodes. This Hyperledger solution also offers a non-forking ledger consensus, which was a key factor in building the exchange. “We can’t tell people that their trade succeeded and then come back after 10 confirmations and say, ‘Oops, sorry, it didn’t work,'” says Kannan. “We needed a framework where when it’s committed, it’s done.”As the BondbloX exchange continues to evolve, the team at BondEvalue remains committed to developing Sawtooth along with Hyperledger’s open source community. “We are looking at how we can contribute back. We have, in fact, made a couple of contributions that are in the process of being assessed by the community,” says Kannan. “We want to add value to the project.”<h4>How it Works: Lower Minimums, Higher Liquidity</h4>The building blocks of the BondbloX Bond Exchange are the BondbloX themselves.Using depository receipts as a model, traditional bonds are brought into the BondbloX Bond Exchange through designated market makers, member participants, or their end individual clients from the secondary market. A designated custodian on the exchange (in this case, Northern Trust) confirms receipt of the underlying bond into the blockchain, which then triggers the bond to be divided into fractionalized BondbloX worth $1,000 each and backed one-to-one on the blockchain.“When a $200,000 bond comes in, the member receives $200,000 in BondbloX which is fractionalized into 200 BondbloX of $1,000 each and can be traded on the BondbloX Bond Exchange,” explains Kannan.With the blockchain infrastructure, settlement on the BondbloX Bond Exchange is nearly instantaneous, occurring on a T+0 basis. So instead of waiting for the normal two-day settlement cycle for traditional bond transactions, BondbloX trades are final within seconds, reducing counterparty settlement risks for investors.However, members who trade in BondbloX are not necessarily locked into the exchange. If a better opportunity in the secondary market arises, the BondbloX are “dual fungible.” Members can request via the custodian to withdraw the BondbloX from the exchange and deliver an OTC bond to a desired venue, which in turn reduces the quantity of BondbloX available to trade on the exchange. “It’s important that members feel that they’re able to take whatever investment opportunities are available to them,” says Kannan.Ultimately, BondEvalue is confident that the best opportunity is to stay within the BondbloX Bond Exchange. “We believe as an exchange, because you’re able to sell at lower minimums, you’ll actually have a much more liquid market that more investors will be capable of investing and buying in,” says Kannan.<h4>Collaboration and Configuration</h4>On the backend, “our governance model is collaborative,” says Kannan.But there are strict rules of engagement for partners who are hosting nodes on the network. While BondEvalue is responsible for most of the work behind updating the nodes with new software, the governing council meets regularly to review upcoming releases and determine a date that is mutually beneficial so that all members can prepare for the updates.“The main challenge is that each release has to be synchronized. Since we use all the nodes, they need to have the exact same software and the exact same version of the transaction process for the system to work as designed,” says Kannan. “If a partner hosting a node doesn’t upgrade, then they will go off chain.”For the frontend, the BondbloX Bond Exchange is a cloud-native application hosted on AWS and accessible via distributed apps on the web. “Because of the event-driven framework that Sawtooth supports, we were able to create a completely asynchronous cloud-native environment that provides the same experience for investors and members that they are accustomed to when trading other exchange-based securities,” says Kannan.To do so, the BondbloX app leverages IoT technology. “We integrated an IoT core solution so that we treat your browser like an IoT device that can deliver real-time notifications,” says Kannan.To avoid committing personally identifiable information on the blockchain, the team also implemented an external database so that personalized user and client information sit outside the network while a pseudo-anonymized identifier is leveraged on the exchange.“Within the blockchain, we had to make it really efficient for the transactions we process or the smart contracts we run, but outside the chain we can query in a really rich format” says Kannan. “So, you’re known by an anonymized ID in the blockchain. But then we merge that data with your real identity in the external database, and that information shows up in our app, which delivers a first-class user experience.”The BondbloX exchange is regulated by the Monetary Authority of Singapore (MAS). After less than a year in the MAS regulatory sandbox — a construct in Singapore where fintech companies test their innovative financial service solutions in the marketplace but under regulatory scrutiny — BondEvalue’s blockchain-based bond exchange graduated after successfully concluding the proof of technology and business model in October 2020.“BondbloX is the latest example of a groundbreaking application of blockchain technology in the capital markets enabled by experimentation in the MAS regulatory sandbox,” says Sopnendu Mohanty, chief fintech officer of the Monetary Authority of Singapore. “We are excited to see productionalization of blockchain in the bond trading market and look forward to great adoption in transforming financial services.”&nbsp;<img src="/uploads/Fractionalising_bonds_on_blockchain_diagram_f7f2f95a0e.jpg" alt=""><h4>The Future of Financial Inclusion</h4>When the BondEvalue team first introduced the BondbloX Bond Exchange, troubleshooting was at the forefront of their concerns.“My biggest worry was what if, what if, what if …” says Kannan. “Today we have gone through all the scenarios and we know what to do if there are issues. We know what those issues are, and we know that they’re not going to bring us down.”So, what’s next? Scaling the BondbloX exchange.BondEvalue continues to engage more member participants such as Taurus Wealth Advisors, the leading fee-based, multi-family wealth management firm in Singapore, and Amstel, an institutional fixed-income broker with operations across Asia and Europe. BondEvalue is also expanding its footprint with a joint venture partnership in Mexico. The company’s goal is to empower a more diverse pool of investors and introduce them to institutional-grade opportunities in the bond market through its cutting-edge blockchain solution.“We are excited to be working with BondEvalue to support a blockchain application that will broaden financial inclusion by opening up institutional bond markets to more investor types,” says Justin Chapman, global head of Market Advocacy &amp; Innovation Research at Northern Trust.“Our vision is to have over 25 million people in Asia invest in bonds in the next five years, from 500,000 individuals currently,” says Banerjee. “This is no small ambition, but we are hopeful as we have seen millions of people forced by COVID-19 lockdowns going online in the last six months for their everyday transactions.”With the continued expansion of the BondbloX Bond Exchange, says Banerjee, “our vision of extending bond trading from Wall Street to Main Street is becoming a reality.”&nbsp;<img src="/uploads/BIFT_and_Hyperledger_Sawtooth_diagram_aa786ba3f5.jpg" alt=""><h4>About Hyperledger</h4>Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration including leaders in finance, banking, Internet of Things, supply chains, manufacturing and Technology. The Linux Foundation hosts Hyperledger under the foundation. To learn more, visit <a href="https://www.hyperledger.org">https://www.hyperledger.org</a>&nbsp;

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How BondEvalue Launched the World’s First Fractional Bond Exchange with Hyperledger Sawtooth

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The Issuer may elect, in its sole discretion, to cancel all or part of any payment of interest in respect of the Notes (including, for the avoidance of doubt, any related Additional Amounts) which is otherwise scheduled to be paid on an Interest Payment Date. In addition, payments of interest in respect of the Notes must not be in made in certain other circumstances as provided in Condition 5(j) (Interest – Cancellation of interest; prohibited interest). Interest payments in respect of the Notes will be non-cumulative. Accordingly, if any payment of interest (or part thereof) is not made in respect of the Notes then the right of the Holders to receive the relevant interest payment (or part thereof) will be extinguished (and shall not accumulate) and the Issuer will have no obligation to pay such interest payment (or part thereof), whether or not future interest payments on the Notes are paid. The cancellation or non-payment of any interest will not constitute a default for any purpose (including, without limitation, Condition 11 (Events of Default) on the part of the Issuer or entitle any action to be taken by Holders and Holders shall have no right thereto whether in a winding-up, dissolution or liquidation of the Issuer or otherwise, nor any right to demand payment from the Guarantor under the terms of the Guarantee. &nbsp;

Discretionary Interest Payments:

Following the occurrence of a Trigger Event or Viability Event, a Contingent Write-down will occur and the full principal amount of the Notes will automatically and permanently be written-down to zero on the Write-down Date. If the Issuer has given a Write-down Notice in accordance with this Condition 7, then on the relevant Write-down Date,<ul><li>(i) the full principal amount of, and any accrued and unpaid interest (whether or not due and payable) on, each Note will automatically be written down to zero, the Notes will be cancelled and all references to the principal amount of the Notes in these Terms and Conditions will be construed accordingly;</li><li>(ii) the Holders will be automatically deemed to have irrevocably waived their right to receive, and will no longer have any rights against the Issuer with respect to, repayment of the aggregate principal amount of, and payment of any accrued and unpaid interest on, the Notes written down pursuant to subclause (i) of this clause (d) (bedingter Forderungsverzicht); and</li><li>(iii) all rights of any Holder for payment of any amounts under or in respect of the Notes (including, without limitation, any amounts arising as a result of, or due and payable upon the occurrence of, an Event of Default) will become null and void, irrespective of whether such amounts have become due and payable prior to the relevant Write-down Notice Date or the Write-down Date.</li></ul>

Contingent Write-down:

Payments of interest will be made at the sole discretion of the Issuer and will be subject to mandatory cancellation if the Issuer does not have sufficient distributable profits, would not be in compliance with its minimum regulatory capital adequacy requirements or the Swiss Financial Market Supervisory Authority FINMA prohibits the Issuer from making such payment.

Discretionary Interest Payment:

If a Contingency Event, or prior to a Statutory Loss Absorption Date (if any), a Viability Event occurs, the full principal amount of the notes will be mandatorily and permanently written down. The notes are not convertible into shares of the Issuer upon the occurrence of a Contingency Event or a Viability Event or at the option of the Holders at any time. See “Terms and Conditions of the Notes—Condition 7 “Write-down”” in the Information Memorandum for the definitions of Contingency Event, Statutory Loss Absorption Date and Viability Event.<ul><li>CET1 Write-down Trigger - 7.00%, based on Credit Suisse Group AG consolidated CET1 ratio.</li></ul>

Write-down:

The Issuer may elect at its full discretion to cancel and in certain circumstances will be required not to pay (in each case, in whole or in part) the Interest Amount otherwise scheduled to be paid on any Interest Payment Date. See Condition 6.10 (Cancellation of Interest Amounts).

Cancellation of Interest Amounts:

The Current Principal Amount of the Notes will be written down if the Issuer’s Common Equity Tier 1 capital ratio falls below 5.125% (on a consolidated basis). Following such reduction, the Current Principal Amount may, at the Issuer’s full discretion, be written back up if certain conditions are met. See Condition 7 (Loss Absorption and Return to Financial Health). For the purposes of this provision, Common Equity Tier 1 capital ratio means the Common Equity Tier 1 capital of the Group expressed as a percentage of its total risk exposure amount (as calculated in accordance with the Relevant Rules (as defined in Condition 2 (Definitions and Interpretation)) and using the definition of the prudential scope of consolidation as defined in the Relevant Rules) or such other meaning given to it (or any equivalent or successor term) in the Relevant Rules.

Write-down and Write-up:

The Distribution Rate applicable to the Perpetual Securities shall be:<ul><li>(i) in respect of the period from and including the Distribution Commencement Date to but excluding the First Reset Date, 4.38 per cent. per annum payable semi-annually in arrear; and</li><li>(ii) in respect of the period from and including the First Reset Date, the Reset Distribution Rate payable semi-annually in arrear.<ul><li>First Reset Date: 17 January 2028</li><li>Reset Date(s): The First Reset Date and each date falling every 10 years after the First Reset Date</li><li>Reset Distribution Rate: Prevailing 10-Year SGD Swap Offer Rate with respect to the relevant Reset Date plus the Initial Spread plus the Step-Up Margin, payable semi-annually in arrear</li><li>Initial Spread: 2.187 per cent.</li><li>Step-Up Margin: 1.00 per cent. per annum</li></ul></li><li>In the event that a Change of Control Event (as defined in Condition 5(h) has occurred, so long as the Issuer has not already redeemed the Perpetual Securities in accordance with Condition 5(h), the then prevailing Distribution Rate shall be increased by the Change of Control Event Margin with effect from (and including) the Distribution Payment Date immediately following the date on which the Change of Control Event occurred (or, if the Change of Control Event occurs on or after the date which is two business days prior to the immediately following Distribution Payment Date, the next following Distribution Payment Date).<ul><li>Change of Control Event Margin: 1.00 per cent. per annum</li></ul></li></ul>

Change of Distribution Rate:

The Perpetual Securities may be redeemed at the option of the Issuer in whole, but not in part, on any Distribution Payment Date or, if so specified hereon, at any time on giving not less than 30 nor more than 60 days’ notice to the Perpetual Securityholders (which notice shall be irrevocable), at their Redemption Amount, (together with distribution (including any Arrears of Distribution and any Additional Distribution Amount) accrued to (but excluding) the date fixed for redemption), following the occurrence of a Change of Control Event (as defined in the applicable Pricing Supplement), where,A “Change of Control Event” occurs when:<ul><li>(i) a person or persons acting in concert acquires or acquire Control of the Issuer or the Guarantor, if such person or persons does not have or do not have, and would not be deemed to have, Control of the Issuer or the Guarantor on the Issue Date; or</li><li>(ii) the Issuer or the Guarantor consolidates with or merges into or sells or transfers all or substantially all of the Issuer’s or, as the case may be, the Guarantor’s assets to any other person, unless the consolidation, merger, sale or transfer will not result in the other person or persons acquiring Control over the Issuer, the Guarantor, or as the case may be, the successor entity.&nbsp;</li><li>“Control” means, in relation to an entity (a) ownership or control of more than 50 per cent. of the voting rights of the issued share capital of such entity or (b) the right to appoint and/or remove all or the majority of the members of such entity’s board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by ownership of share capital, the possession of voting rights, contract or otherwise.</li></ul>

Redemption upon a Change of Control:

Optional Payment, Dividend Stopper, Dividend Pusher, Cumulative Deferral and Additional Distribution are applicable

Distribution Discretion:

Distribution Deferral, Non-cumulative Deferral, Optional Payment and Dividend Stopper are applicable.

Distribution Discretions:

Distribution Deferral, Non-cumulative Deferral, Optional Distribution and Dividend Stopper are applicable.

For the purposes of Condition 6(e)(ii): “Change of Control Event” means:<ul><li>(a) any Person or Person or Persons (acting together with its related corporations) (other than Permitted Holders) acquires or acquire Control of the Issuer, if such Person or Persons does not or do not have, and would not be deemed to have, Control over the Issuer on the Issue Date; or</li><li>(b) the Issuer consolidates with or merges into or sells or transfers all or substantially all of the Issuer's assets to any other Person or Persons (acting together with its related corporations) (other than Permitted Holders), unless the consolidation, merger, sale or transfer will not result in such other Person or Persons acquiring Control over the Issuer or the successor entity;</li></ul>

Redemption upon Change of Control Event:

Optional Payment, Dividend Stopper, Non-cumulative Deferral are applicable.

Distribution Stopper is applicable.

<ul><li>(i) In instances where “Write Down” is specified as the Loss Absorption Measure in the relevant Pricing Supplement for any Perpetual Capital Securities, if a Loss Absorption Event occurs the Issuer shall, upon the issue of a Write Down Notice, irrevocably and without the need for the consent of the Trustee or the holders of any Perpetual Capital Securities:<ul><li>(A) cancel any accrued but unpaid Distributions (up to the relevant Loss Absorption Measure Effective Date); and</li><li>(B) if the cancellations of Distributions in accordance with Condition 7(a)(i)(A) above, together with the cancellation of interest, dividend and/or distribution on any other Loss Absorbing Instruments on or before the relevant Loss Absorption Measure Effective Date, is in aggregate insufficient to result in the relevant Loss Absorption Event no longer continuing, irrevocably (without requiring the consent of the Securityholders) procure that the Registrar shall reduce the Prevailing Principal Amount, in respect of each Perpetual Capital Security (in whole or in part) by an amount equal to the relevant Write Down Amount (a “Write Down”, and “Written Down” shall be construed accordingly).</li><li>Concurrently with the giving of the Loss Absorption Event Notice, the Issuer shall procure, unless otherwise directed by the MAS, that a similar notice be given in respect of other Loss Absorbing Instruments (in accordance with their terms).</li><li>In addition, concurrent with the giving of the Write Down Notice, the Issuer shall also procure, unless otherwise directed by the MAS, that (i) a similar notice be given in respect of other Loss Absorbing Instruments (in accordance with their terms) and (ii) any accrued (and unpaid) distributions in respect of such Loss Absorbing Instruments are cancelled and (if required) the prevailing principal amount of each class of Loss Absorbing Instruments outstanding (if any) is written down or converted into Shares or any other securities which qualify as Common Equity Tier 1 Capital (as the case may be) by a corresponding proportion as soon as reasonably practicable following the giving of such Write Down Notice.</li><li>Once any principal or Distributions under a Perpetual Capital Security has been Written Down, it will be extinguished and will not be restored in any circumstances, including where the relevant Loss Absorption Event ceases to continue. No Securityholder may exercise, claim or plead any right to any Write Down Amount, and each Securityholder shall be deemed to have waived all such rights to such Write Down Amount.</li></ul></li><li>(ii) If a Loss Absorption Event Notice has been given in respect of any Perpetual Capital Securities in accordance with this Condition 7(a), transfers of any such Perpetual Capital Securities that are the subject of such notice shall not be permitted during the Suspension Period. From the date on which a Loss Absorption Event Notice in respect of any Perpetual Capital Securities in accordance with this Condition 7(a) is issued by the Issuer to the end of the Suspension Period, the Trustee and the Registrar shall not register any attempted transfer of any Perpetual Capital Securities. As a result, such an attempted transfer will not be effective.</li><li>(iii) Any reference in these Conditions to principal in respect of the Perpetual Capital Securities shall refer to the principal amount of the Perpetual Capital Security(ies), reduced by any applicable Write Down(s).</li><li>Any Write Down of Perpetual Capital Securities is subject to the availability of procedures to effect the Write Down in the relevant clearing systems. For the avoidance of doubt, however, any Write Down of any Perpetual Capital Securities under this Condition 7 will be effective upon the date that the Issuer specifies in the Loss Absorption Event Notice (or as may otherwise be notified in writing to the Securityholders, the Trustee and Issuing and Paying Agent by the Issuer) notwithstanding any inability to operationally effect any such Write Down in the relevant clearing system(s).</li></ul>

Write-down on a Loss Absorption Event:

The terms of the Notes provide that interest will be due and payable on an Interest Payment Date only if it is not cancelled or deemed to have been cancelled, and we have the sole and absolute discretion at all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any Interest Payment Date. We will also be restricted from making interest payments in the circumstances described below. As a result, you may not receive any interest on any Interest Payment Date or at any other times, and you will have no claims whatsoever in respect of that cancelled or deemed cancelled interest.

Cancellation of Interest Payments:

We have the right, in our sole discretion, to cancel all or part of any payment of interest, including (but not limited to) if such cancellation is necessary to prevent our Common Equity Tier 1 capital ratio pursuant to Article 92 (1) (a) CRR or any successor provision, determined on a consolidated basis (which we refer to as our “Common Equity Tier 1 Capital Ratio”) from falling below 5.125 per cent. or to meet a requirement imposed by law or our competent supervisory authority. If we make use of such right, we will give notice to the holders in accordance with the Capital Securities Indenture without undue delay, but no later than on the relevant Interest Payment Date.

Discretionary Cancellation of Interest Payments:

Payment of interest on the Notes for the relevant Interest Period will be cancelled (without prejudice to the exercise of our sole discretion pursuant to the terms described herein):<ul><li>to the extent that such payment of interest together with any additional kind of payment of dividends or interest (which we refer to as a “Distribution”) that are simultaneously planned or made or that have been made by us on the other capital instruments which, according to the CRR, qualify as common equity Tier 1 capital or Additional Tier 1 capital (which we refer to as “Tier 1 Instruments”) in our then current financial year would exceed the Available Distributable Items, provided that, for such purpose, the Available Distributable Items will be increased by an amount equal to what has been accounted for as expenses for Distributions in respect of Tier 1 Instruments (including payments of interest on the Notes) in the determination of the profit (Gewinn) on which the Available Distributable Items are based; or</li><li>if and to the extent that our competent supervisory authority orders that all or part of the relevant payment of interest be cancelled or another prohibition of Distributions is imposed by law or an authority.</li></ul>

Mandatory Cancellation of Interest Payments:

Upon the occurrence of a Trigger Event (as defined below), the redemption amount and the nominal amount of the Notes will be reduced by the amount of the relevant write-down (as further described below). Accordingly, under the terms of the Notes, upon the occurrence of a Trigger Event leading to a write-down in the principal amount of the Notes, you could lose all or part of the value of your investment in the Notes. A regulatory write-down will not constitute a default or an event of default under the Notes or the Capital Securities Indenture or give rise to any right to accelerate the repayment of any principal on the Notes.&nbsp;<ul><li>A “Trigger Event” will occur if, at any time, our Common Equity Tier 1 Capital Ratio falls below the 5.125 per cent.&nbsp;</li><li>Upon the occurrence of a Trigger Event, a write-down will be effected pro rata with all other Additional Tier 1 instruments within the meaning of the CRR (Additional Tier 1 capital), the terms of which provide for a write-down (whether permanent or temporary) upon the occurrence of the Trigger Event. For such purpose, the total amount of the write-downs to be allocated pro rata will be equal to the amount required to restore fully our Common Equity Tier 1 Capital Ratio to 5.125 per cent. but will not exceed the sum of the nominal amounts of the relevant instruments outstanding at the time of occurrence of the Trigger Event. The sum of the write-downs to be effected with respect to the Notes will be limited to the outstanding aggregate nominal amount of the Notes at the time of occurrence of the relevant Trigger Event.</li></ul>

After a write-down has been effected, the nominal amount and the redemption amount of each Note, unless previously redeemed or repurchased and cancelled, may be written up in accordance with the following provisions in each of our financial years, subsequent to the occurrence of such write-down, until the full initial nominal amount has been reached, to the extent that a corresponding annual profit (Jahresüberschuss, calculated in accordance with German law and accounting principles) is recorded, and the write-up will not give rise to or increase an annual loss (Jahresfehlbetrag, calculated in accordance with German law and accounting principles). The write-up will occur with effect as of (and including) the Interest Payment Date immediately following our financial year for which the above-mentioned annual profit (Jahresüberschuss) was determined. The write-up will be effected pari passu with write-ups of other Additional Tier 1 instruments within the meaning of the CRR, unless this would cause us to be in breach of any of our contractual obligations that we have assumed, or with any statutory or regulatory obligations. Subject to the conditions described in “Description of the Notes—Write-downs and Write-ups of the Principal Amount of the Notes—Write-ups of the Principal Amount of the Notes,” which may limit the extent of any write-up, it will be at our discretion to effect a write-up. In particular, we may effect a write-up only in part or effect no write-up at all, even if a corresponding annual profit is recorded and the conditions described in “Description of the Notes—Write-downs and Write-ups of the Principal Amount of the Notes—Write-ups of the Principal Amount of the Notes” are fulfilled.

Write-up:

We will have sole and absolute discretion at all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any interest payment date.

Distribution Interest Payments:

A “Capital Adequacy Trigger Event” will occur if the end-point CET1 Ratio as of any Quarterly Financial Period End Date or Extraordinary Calculation Date, as the case may be, is less than 7.0% on such date.&nbsp;<ul><li>Automatic Conversion upon a Capital Adequacy Trigger Event: If a Capital Adequacy Trigger Event occurs, then an Automatic Conversion will occur without delay (but no later than one month following either (i) the Ordinary Reporting Date, if a Capital Adequacy Trigger Event has occurred as of a Quarterly Financial Period End Date, or (ii) the Extraordinary Calculation Date, if a Capital Adequacy Trigger Event has occurred as of such date), as described under “Description of the Securities—Automatic Conversion Upon Capital Adequacy Trigger Event—Procedure—Automatic Conversion Procedure,” at which point all of our obligations under the Securities will be irrevocably and automatically released in consideration of our issuance of the Conversion Shares to the Conversion Shares Depository (or to the relevant recipient in accordance with the terms of the Securities) on the date on which the Automatic Conversion will take place, or has taken place, as applicable (such date, the “Conversion Date”), and under no circumstances will such released obligations be reinstated.</li><li>After a Capital Adequacy Trigger Event, subject to the conditions described under “Description of the Securities—Automatic Conversion Upon Capital Adequacy Trigger Event—Procedure,” we expect the Conversion Shares Depository to deliver to the securityholders on the Settlement Date either (i) Conversion Shares or (ii) if we elect, in our sole and absolute discretion, that a Conversion Shares Offer be made, the Conversion Shares Offer Consideration.&nbsp;</li><li>The Securities will not be convertible into Conversion Shares at the option of the securityholders at any time.</li></ul>&nbsp;

Capital Adequacy Trigger Event:

If the Company does not make an Interest Payment or part thereof on the relevant Interest Payment Date, such non-payment shall evidence:<ul><li>(i) the non-payment and cancellation of such Interest Payment (or relevant part thereof) by reason of it not being due in accordance with the provisions described under “Solvency Condition” below;</li><li>(ii) the cancellation of such Interest Payment (or relevant part thereof) in accordance with the provisions described under “Restrictions on Interest Payments” below;</li><li>(iii) the cancellation of such Interest Payment (or relevant part thereof) in accordance with Condition 7(c); or as appropriate;</li><li>(iv) the Company’s exercise of its discretion otherwise to cancel such Interest Payment (or relevant part thereof) as described under “Interest Payments Discretionary” below,</li></ul>and accordingly such interest shall not in any such case be due and payable.

Interest on the Securities is due and payable only at the sole and absolute discretion of the Company, subject to the additional restrictions set out in the Terms and Conditions. Accordingly, the Company may at any time elect to cancel any Interest Payment (or part thereof) which would otherwise be payable on any Interest Payment Date.

Interest Payments Discretionary:

If the Conversion Trigger Event occurs, each Security shall be automatically and irrevocably discharged and satisfied by its Conversion into Ordinary Shares, credited as fully paid, and the issuance of such Ordinary Shares to the Conversion Shares Depositary to be held on trust for the Securityholders. The Conversion shall occur without delay upon the occurrence of a Conversion Trigger Event.<ul><li>The Conversion Trigger Event shall occur if at any time the CET1 Ratio is less than 7.00 per cent. The CET1 Ratio is calculated on a consolidated and fully loaded basis.</li><li>The Trust Deed provides that if the Trustee, in the exercise of its functions, requires to be satisfied as to any fact (including, without limitation, as to whether a Conversion Trigger Event has occurred), it may call for and accept as sufficient evidence of that fact a certificate signed by two Authorised Signatories of the Company as to that fact.</li><li>Conversion Price: The Conversion Price per Ordinary Share in respect of the Securities is U.S.$6.353 subject to certain anti-dilution adjustments as described in the Terms and Conditions. As at 5 January 2021, the Conversion Price was equivalent to a price of £4.661, translated into U.S. Dollars at an exchange rate of £1 = U.S.$1.363.</li></ul>

Conversion Trigger Event:

No Holder may require the transfer of any Capital Security (or part thereof) during the period of 15 days ending on (and including) the due date for any payment of principal of that Capital Security or seven days ending on (and including) any Record Date in respect of a Coupon Payment Date.

Closed Periods:

The Issuer may elect, subject as provided below, to defer any Coupon Payment otherwise scheduled to be paid on a Coupon Payment Date by giving notice of such election to the Holders (in accordance with Condition 15), the Trustee and the Principal Paying Agent not less than 20 Business Days prior to the relevant Coupon Payment Date. The Issuer may not exercise its rights under this Condition 4 to defer Coupon Payments if a Capital Disqualification Event has occurred (and the Issuer has notified the FSA of such occurrence), unless a Capital Breach Event has also occurred and is continuing.The Issuer may (except where Condition 3 applies) at any time satisfy any Deferred Coupon Payment by operation of the procedures set out in Condition 6 and, subject to Condition 8(e), shall only be obliged to do so upon the occurrence of the first of the following to occur: (i) redemption of the Capital Securities in accordance with Condition 7(b); (ii) redemption, substitution or variation of the terms of the Capital Securities in accordance with Condition 7(c); (iii) redemption, substitution or variation of the terms of the Capital Securities in accordance with Condition 7(d); and (iv) in relation to any Deferred Coupon Payment relating to any particular Coupon Payment Date, within three months following such Coupon Payment Date, but in any such case, subject to, and only by the operation of the procedures set out in, Condition 6.

Coupon Deferral:

If a Change of Control Triggering Event (as defined below) occurs with respect to the Company, each Noteholder shall have the right at such Noteholder ’s option and subject to ECB Directions, to require the Company to redeem such Noteholder ’s Note in whole or in part at 101.0 per cent. of their principal amount plus accrued and unpaid interest, if any, to and including the date of purchase, in accordance with the Conditions. See Condition 6.3.

Redemption for a Change of Control Triggering Event:

The Company has agreed in the Trust Deed constituting the Notes and the Conditions related thereto to observe certain covenants, including, among other things, limitation on indebtedness, negative pledge, limitation on restricted payments, limitation on asset sales, limitation on affiliate transactions, consolidation and merger and reporting covenants. For details see Condition 4.

Convenants:

If a Non-Payment Event occurs, the Issuer shall not pay the corresponding Interest Payment Amount and the Issuer shall not have any obligation to make any subsequent payment in respect of any unpaid Interest Payment Amount as more particularly described in Condition 6 (Interest Cancellation). In such circumstances, interest will not be cumulative and any interest which is not paid will not accumulate or compound and holders of the Capital Securities will have no right to receive such interest at any time, even if interest is paid in the future.

If a Non-Viability Event occurs, a Write-down will take place in accordance with Condition 10.2 (Write-Down at the Point of Non-Viability – Non-Viability Notice). "Write-down" means:<ul><li>(i) the holders' rights under the Capital Securities shall automatically be deemed to be irrevocably, unconditionally and permanently written-down in a proportion corresponding to the relevant Write-down Amount;&nbsp;</li><li>(ii) in the case of the Write-down Amount corresponding to the full Prevailing Principal Amount of the Capital Securities then outstanding, the Capital Securities shall be cancelled; and</li><li>(iii) all rights of any holder for payment or any amounts under or in respect of the Capital Securities, in a proportion corresponding to the relevant Write-down Amount (and any corresponding Interest Payment Amounts), shall be cancelled and not restored under any circumstances, irrespective of whether such amounts have become due and payable prior to the date of the Non-Viability Notice or the Non-Viability Event Writedown Date.</li></ul>

Write-down at the point of Non-Viability:

<ul><li>(i) Optional Redemption Date(s): 16 December 2021;&nbsp;</li><li>(ii) Optional Redemption Amount and method, if any, of calculation of such amount(s): U.S.$1,000 per Calculation Amount;</li><li>(iii) Notice period (if other than as set out in the Conditions): as specified in Condition 6(f).</li></ul>

Investor Put Option:

Subject to Condition 4.4 (Increase in Rate of Distribution) (and Condition 4.5 (Optional Deferral of Distributions) if made applicable in the applicable Pricing Supplement), the Securities will confer a right to receive distributions (“Distributions”) (i) at the Initial Rate of Distribution; or (ii) if any Step Up Date is specified in the applicable Pricing Supplement to be applicable:<ul><li>(a) from the period commencing on (and including) the Issue Date to (but excluding) the Step Up Date, at the Initial Rate of Distribution; and&nbsp;</li><li>(b) from (and including) each Reset Date (including the Step Up Date) to (but excluding) the immediately following Reset Date, at the relevant Reset Rate of Distribution (determined by the Calculation Agent on the relevant Reset Determination Date and notified to the Securityholders, the Principal Paying Agent and the Registrar), payable semi-annually in arrear on each Distribution Payment Date.</li><li>Step Up Date: 29 July 2025</li><li>Reset Date: The Step Up Date and any subsequent date which is the fifth anniversary of any Reset Date.</li><li>Step Up Margin: 5.000% per annum</li></ul>

Distribution Deferral, Dividend Stopper, Dividend Pusher and Cumulative Deferral are applicable

If Redemption due to a Change of Control Event is specified as being applicable in the applicable Pricing Supplement, if a Change of Control Event occurs, the Issuer may redeem the Securities (in whole but not in part)&nbsp;<ul><li>(i) at any time prior to but excluding the Step Up Date at the Special Redemption Price or&nbsp;</li><li>(ii) on or at any time after the Step Up Date at the Redemption Price, in each case on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of redemption to the Securityholders in accordance with Condition 12.1 (Notices to Securityholders).</li><li>“Special Redemption Price” means 101% of the Principal Amount of the Securities plus any accrued but unpaid Distributions and any Arrears of Distribution (including any amount of Distributions accrued thereon in accordance with Condition 4.5(a)).</li></ul>

Early Redemption due to a Change of Control Event:

<ul><li>(1) At any time and from time to time on after June 4, 2023, the Company may at its option redeem the Notes, in whole or in part, at a redemption price equal to 101% of principal amount, plus accrued and unpaid interest, if any, to (but not including) the redemption date if redeemed during the twelve-month period beginning on June 4, 2023.</li><li>(2) At any time prior to 4 June 2023, the Company may at its option redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the applicable premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date.</li><li>(3) At any time and from time to time prior to 4 June 2023, the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more sales of common stock of the Company in an equity offering at a redemption price of 105.55% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes originally issued on the original issue date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related equity offering.</li><li>The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption.</li></ul>

Optional Redemption:

“Change of Control Triggering Event” means the occurrence of both a Change of Control and, provided that the Notes are rated by at least one Rating Agency, a Rating Decline.<ul><li>“Change of Control” means the occurrence of one or more of the following events:<ul><li>(1) the merger, amalgamation or consolidation of the Company with or into another Person (other than one or more Permitted Holders) or the merger or amalgamation of another Person (other than one or more Permitted Holders) with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than one or more Permitted Holders);</li><li>(2) the Permitted Holders are the beneficial owners of less than 50.1% of the total voting power of the Voting Stock of the Company;</li><li>(3) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the U.S. Exchange Act) is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 of the U.S. Exchange Act), directly or indirectly, of total voting power of the Voting Stock of the Company greater than such total voting power held beneficially by the Permitted Holders;</li><li>(4) individuals who on the Original Issue Date constituted the board of directors of the Company, together with any new directors whose election by the board of directors was approved by a vote of at least two-thirds of the directors then still in office who were either directors or whose election was previously so approved, cease for any reason to constitute a majority of the board of directors of the Company then in office; or</li><li>(5) the adoption of a plan relating to the liquidation or dissolution of the Company.</li></ul></li><li>Not later than 30 days following a Change of Control Triggering Event, the Company will make an Offer to Purchase all outstanding Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date. &nbsp;</li></ul>

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