Merrion Note
There is the liquidity aspect to consider, which does offset the downside of the ten year term to some extent. However this is difficult to assess given that Soc Gen will be the only market maker. But you are right, from the point of view of a guarantee representing an insurance policy, a product offering a capital guarantee on the 10th anniversary would seem to be an inefficient use of capital.
Given the improvement in bank funding and consequent decline in deposit rates, it's not surprising to see products adjust to keep the appearance of offering an attractive alternative to cash. There is a product out there currently with 4% option spend - the lowest I have even seen for a product of its type. If volatility rises from here it will all but kill off the traditional deposit plus call option tracker.
A point of potential interest with structured notes/corporate bonds like this one is how they will be treated post introduction of AIFMD in July. Apparently this directive will capture all non-UCITs structures. If they fall under the auspices of this directive (like private equity, property, hedge funds) then minimum investment will be €125k as far as I am aware. Anyone know if this is relevant or not?