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ODI Fellowship Scheme signs Frontclear as newest partner

Partnership expected to enhance public sector knowledge on money and interbank markets

AMSTERDAM and LONDON, 05 December 2018 – Development finance company Frontclear Management B.V. partnered with Overseas Development Institute (ODI) Fellowship Scheme to expand its network of market experts and leaders that provide capacity development to regulators in selected emerging markets and developing countries.

Signing as ODI Fellowship Scheme´s newest partner, Frontclear and ODI will work together to strengthen the capacity of regulators and other institutions relevant to the development of local money markets, by responding to requests for the placement of young experts. Both parties will co-sponsor the financial needs to realize a placement, with Frontclear additionally bringing in its money market experience and network and ODI its proven ability to source and effectively post qualified fellows.

The partnership called ‘ODI/Frontclear Fellowship’ will upgrade local capacity in target beneficiaries through additional expertise in money market development, with the end goal of building an inclusive interbank market in these countries. A minimum of five fellows will be funded annually to work in Frontclear’s countries of operations, spanning Asia, CIS, Africa and Latin America.

“The ODI/Frontclear Fellowship offers great opportunity for our beneficiaries to gain from ODI´s innovative approach and solutions to institutional limitations in the public sector and Frontclear´s expertise in removing barriers to interbank market transactions. Banking on our combined footprint in our target markets, I am confident we could make a great impact to the countries where our fellows will be posted,” according to Ingrid Hagen, Frontclear Vice-President Strategic Projects.

ODI is an independent, global think tank, working for a sustainable and peaceful world in which every person thrives. It harnesses the power of evidence and ideas through research and partnership to confront challenges, develop solutions, and create change.

ODI Fellowship Scheme, which has been active since 1963, provides high poverty, low income countries with junior economists and statisticians of high caliber to fill in the gap in local capacity. These fellows are normally designated in the ministries of finance or planning and in some cases, in the ministries of trade and industry, regional integration, agriculture, environment, water, health and education. The partnership with Frontclear expands on this base by integrating money market specialization in their portfolio as well as central banks as counterparties.

“The ODI Fellowship Scheme provides capacity to developing country governments in economics and statistics where gaps in local capacity exists. The target beneficiaries for this partnership with Frontclear can employ high caliber economists to improve their ability to strengthen the understanding and capacity of money market regulators.” Robin Sherbourne, Head of ODI Fellowship Scheme, said.

The initiative is part of Frontclear Technical Assistance Programme (FTAP) Partnership Facility, which mobilizes financial support from regional and global bank and other financial institutions to deliver much-needed capacity development programs tailored to the needs of emerging and frontier markets.

“Participating in this initiative would mean creating lasting impact to local money markets of our beneficiaries, thereby contributing to the overall development of these countries. Frontclear remains committed to rallying regional and global support for this unique endeavor,” Hagen concluded.

For more information on the program, visit https://www.odi.org/odi-fellowship-scheme or download the ODI_FELLOWSHIP_LEAFLET_2019-DIGITAL (1).

 

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Frontclear and ABN AMRO Clearing team-up to address clearing infrastructure challenges in emerging and frontier markets

Partnership to support best practice in clearing and settlement

AMSTERDAM, 12 November 2018 – On 12 November, a Memorandum of Understanding was signed by Frontclear, the development finance company, and ABN AMRO Clearing, a leading global clearing firm. This MoU highlights their shared commitment to address clearing and settlement challenges in emerging and frontier markets in Africa, Asia and Latin America.

ABN AMRO Clearing agreed to provide project and institutional review recommendations as well as knowledge and advisory services on clearing and settlement infrastructure. The clearing firm pledged support to Frontclear research on innovations and developments in clearing and settlement structures and systems, including blockchain.

“This partnership with ABN AMRO Clearing supports our growing footprint on catalyzing stable and inclusive interbank markets in emerging and developing countries. We welcome a leading global clearing and financial services provider like ABN AMRO Clearing as a technical assistance partner. Their involvement holds a massive opportunity for our beneficiaries in target countries to upgrade current clearing and settlement understanding, knowledge and facilities,” noted Ingrid Hagen, Vice President Strategic Projects at Frontclear.

Frontclear draws from its proven track record supporting interbank transactions and building relationships with stakeholders and beneficiaries in developing and frontier markets. Its network includes key officials in central banks, capital markets authorities, stock exchange and commercial banks in the mentioned jurisdictions.

To-date, Frontclear has trained over 900 obligors and regulators in over 13 countries, developed 11 technical assistance country strategies based on full capital markets analyses, signed 10 official partnerships with local regulatory agencies and market associations, and has issued over USD 240 million in guarantees on transactions with USD 490 million in notional.

“ABN AMRO Clearing wants to lead the way to safe and transparent markets, as the need for dependable, stable, accessible markets is greater than ever. We are taking our societal responsibility to the next level by teaming up with Frontclear as a complementary partner. We commit to making our staff available to support initiatives that make local interbank markets in emerging and developing countries more transparent and efficient. This will result in enhanced access to financing for local small and midsized companies.” said Vicky Sins, Global Director Corporate Hedgers and responsible for the Global Sustainability Program at ABN AMRO Clearing.

The Frontclear and ABN AMRO Clearing partnership will be officially introduced to ABN AMRO’s global network in an official event on 12 November 2018 in Amsterdam.

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Frontclear facilitates a landmark transaction with State Bank Mongolia, EBRD and ING Bank

July 2018. Frontclear arranged and structured a USD 30 million cross-border collateral swap with the European Bank for Reconstruction and Development (EBRD), enabling a further repo transaction between the Mongolian State Bank and ING Bank. It is the first time in Mongolia that a repo or collateral swap transaction has been done with local currency collateral cross border and a first such deal involving a commercial bank.

In this transaction, Frontclear borrowed USD 30 million in US Treasury bonds from the EBRD and then on-lent them to the State Bank LLC in Mongolia against Mongolian local currency government bonds in a collateral swap transaction. Frontclear guaranteed the transaction to EBRD. With the US Treasuries in hand, State Bank LLC borrowed funds in a repo transaction with ING Bank N.V. Singapore branch.

Credit risk, legal and operational risks plus wrong way risk concerns, has made it very difficult for Mongolian banks to source hard currency liquidity against local collateral in global capital markets. The landmark transaction made it possible for State Bank LLC to competitively access funding from foreign banks. It also helped clarify certain legal and operational issues related to bond trading in Mongolia, which were mitigated by effective Frontclear deal arranging and structuring.

Both collateral swap transactions were documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customized the swap confirmation to legal issues in the Mongolian market. The repo transaction was closed under a Global Master Repurchase Agreement (GMRA). The transaction documents introduced best practice operational and legal concepts, which will be further reviewed in a Frontclear organized Executives’ Roundtable in Ulaanbaatar in September 2018.

“We are proud of the catalyst role we have played in originating the structure. The transaction provides a new mechanism for Mongolian banks to utilize local collateral in international capital markets and sets a benchmark for the development of Mongolia’s money market going forward.” – Andrei Shinkevich, SVP Frontclear
“We expect this transaction to generate positive ramifications for Mongolia as it enabled know-how transfer to the local market and should have a demonstration effect on other potential followers from global financial markets.” – Aude Pacatte, Director, Head of Portfolio Management EMEA, EBRD

“State Bank is delighted for successfully executing this inaugural transaction that provides possibilities to practice the financial instrument in line with international best practice and facilitates development of interbank money market in broader perspective in Mongolia.” – Chinbat Lkhagvasuren, Director General, Treasury Department, State Bank of Mongolia

“We are proud to have been given the opportunity to play an instrumental role in the further development of the capital market in Mongolia, together with State Bank of Mongolia, Frontclear, and EBRD.”– Erik Versavel, ING Mongolia Country Head

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FMDQ and Frontclear partner to establish clearing infrastructure in Nigeria

31 May 2018. Today, FMDQ Clear Limited and Frontclear signed an agreement to jointly enhance Nigeria’s first central clearing house structure, with the support of a settlement guarantee fund. The collaboration is the culmination of a long-standing working relationship focused on improving how the Nigerian OTC financial market functions and follows-on an initial introduction via the International Capital Market Association (ICMA), of which FMDQ is a full Member and Frontclear a long-standing partner.

FMDQ Clear Limited (FMDQ Clear) and Frontclear have joined to realize a first in the Nigerian market.  Combined, they will facilitate a clearing structure to strengthen the OTC market liquidity. FMDQ Clear, a central clearing house positioned to deliver end-to-end clearing and settlement services that will help enhance integrity and eliminate the inherent risks to bilateral trades in the Nigerian capital market, will be backed by Frontclear’s core financial guarantee product, thereby improving the creditworthiness of participating counterparties and reducing initial set-up costs. A wholly-owned subsidiary of FMDQ OTC Securities Exchange, who provides a platform for the registration, listing, quotation, noting, trading, order execution and trade reporting of fixed income, currency and derivatives products in the Nigerian financial markets, FMDQ Clear has been engaged by the OTC Exchange to carry out post-trade services for transactions executed in its cash and derivatives markets.

The Frontclear guarantee will, in practice, function like a settlement/credit guarantee fund typical to more developed financial markets. Upon default of a clearing member, Frontclear guarantees any mark-to market losses incurred by any other counterparty clearing or dealing member(s), and up to a pre-agreed maximum amount. With this guarantee fund, FMDQ Clear can significantly improve access to a breadth of financial products such as interest rate and currency derivatives, and repurchase agreements (repos), especially for smaller dealing members who may have been previously excluded because of perceived counterparty credit risk.

A joint Frontclear Technical Assistance Programme (FTAP) project explored the feasibility of establishing clearing infrastructure in Nigeria as well as the most suitable design of such infrastructure for the Nigerian market. This effort was made possible with the support and input from key Nigerian financial services regulators, including the Securities and Exchange Commission, Nigeria (SEC) and the Central Bank of Nigeria (CBN), as well as the local banking industry. FMDQ Clear participants will have access to further Technical Assistance provided by Frontclear as needed, including trainings on repo accounting and margining, amongst others.

FMDQ Clear, which will be the first of such infrastructure in Africa, with a third-party settlement guarantee arrangement that improves on settlement finality, is positioned to becoming a world-class central clearing house, with robust risk waterfall supported by settlement guarantee fund, and strong governance and risk frameworks to clear products in the cash, repos and derivatives markets, and is exemplary of Frontclear’s development impact rationale: catalyzing transactions that support healthy money markets and stable financial systems. The establishment of this clearing infrastructure will greatly contribute to making the Nigerian interbank market globally competitive, operationally excellent, liquid and diverse, in line with FMDQ Group’s GOLD Agenda for the transformation of the Nigerian financial markets, as participating clearing and dealing members will have expanded access and in turn, be better able to serve the needs of their client base and the real economy.

“In our stride to position our markets on the path of increased liquidity and global competitiveness, the FMDQ-Frontclear guarantee fund initiative is a landmark achievement positioned to engender market integrity, which will bolster liquidity and financial system stability in the Nigerian economy.”  Bola Onadele. Koko, Managing Director/Chief Executive Officer, FMDQ Group

 

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Frontclear Signs Memorandum of Understanding with ACI Tanzania to Develop Local Money Markets

Dar es Salaam – May 4, 2018 – Frontclear and The Financial Markets Authority (ACI) in Tanzania have signed an MoU to join forces and support the development of local money markets in Tanzania. The signing was witnessed by an audience of more than 50 banking professionals. Both sides will work together to overcome existing challenges in the market, which hinder the development of participatory, liquid and stable interbank markets.

Ingrid Hagen, Vice-President of Strategic Projects at Frontclear said: ‘’We’re delighted with this opportunity, making this the 3rd East African country where we partner to develop money market ecosystems and transaction capacity’’.

The MoU covers a 2-year period, during which Frontclear and ACI Tanzania will jointly host a series of trainings, advisory services and research projects. The first training took place on May 3rd and 4th at the Bank of Tanzania, with a strong attendance rate, covering the local repo market and GMRA enforceability.

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EBRD & Frontclear executed 1st AMD repo

On 19 March 2018, the European Bank for Reconstruction and Development (EBRD) executed its first reverse repo transaction with Armswissbank, one of the leading banks in Armenia.
EBRD is lending circa AMD 2.3bln to Armswissbank for one year against Armenian government US Dollar Eurobonds. The transaction is guaranteed by Frontclear, a leading money markets development company funded by European governments and development finance institutions. This is the first transaction with Frontclear in Armenia.

Established in 2004, Armswissbank is a dynamically growing financial institution, operating as a private, corporate and investment bank, with a strong emphasis on brokerage services and liquidity management for Armenia’s financial sector. The execution of this repurchase agreement is a milestone for the EBRD’s on-going efforts to develop the Armenian Dram and the local capital markets. The transaction has a strong demonstration effect on the local financial markets as it is under the first Global Master Repurchase Agreement (GMRA), signed between EBRD and Armswissbank in January 2018, which allows parties to trade in repos.

The transaction is made possible due to the strong commitment from the Central Bank of Armenia that ensured the adoption of a legal and regulatory framework for derivative and repo transactions in Armenia. This legal reform was supported through EBRD’s Technical Cooperation funds. Participating in the AMD repo market is a strong signal to the authorities and international investors that EBRD is not only providing technical expertise to help to develop local money markets, but is also participating in the markets.

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Barclays Africa Group and Frontclear partner to develop Africa’s interbank markets

24 January 2018, Accra – Barclays Africa Group Limited (BAGL) has signed a 2-year agreement to provide financial support to Frontclear Technical Assistance Programme (FTAP) through the latter’s Partnership Facility. The contribution reflects the bank’s commitment to market development in Kenya, Tanzania, Uganda, Zambia and Ghana.

BAGL and Frontclear also concluded a memorandum of understanding regarding the implementation of the TradeClear interbank guarantee facility in Kenya and other leading African financial markets.

 

The partnership allows BAGL to implement the findings of the Barclays Africa Financial Markets Index. Released in late 2017, the Index ranks the maturity, openness and accessibility of 17 financial markets in Africa, based on both qualitative and quantitative criteria. Development of local investor capacity and ability to attract foreign capital are also key points of focus.

 

“Our partnership with Frontclear and this investment in the FTAP Partnership Facility is a further demonstration of Barclays Africa Group’s commitment to expanding and deepening financial markets across Africa. The investment allows us to immediately act on the findings of our Africa Financial Markets Index, which through expert analysis of the African financial markets, draws attention to the considerable investment opportunities and uncovers the untapped market potential” – George Asante, Head of Global Markets Africa (ex SA) at Barclays Africa Group

 

“We are delighted to formalize our partnership with Barclays Africa Group and look forward to working together in building more liquid, stable and inclusive interbank markets. The developments of these markets are critical to economic growth, stability and poverty alleviation.” – Philip Buyskes, CEO Frontclear

The FTAP Partnership Facility is a unique initiative, in that it teams-up international donors with regional and global banks, in a highly targeted effort to build inclusive interbank markets in frontier economies. Its trainings, advisory and research activities combine to remove the barriers to well-functioning capital markets in Africa, Asia and Latin America.

 

The TradeClear interbank guarantee facility aims to establish secured trading interbank trading environments in Africa. Under the program, Frontclear guarantees financial losses for all participants incurred due to counterparty failure, thereby stabilizing the interbank market and improving liquidity. It is expected that TradeClear will be implemented in Kenya in Q1 of 2018.

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Frontclear makes presentation at the Bank of Zambia Treasurer’s Workshop

Lusaka, October 9 2016 – Frontclear’s CFRO Erik van Dijk, delivered a presentation at the Bank of Zambia Treasurer’s Workshop in Lusaka, on Sunday. Mr. van Dijk presented a legal opinion on specific issues relating to transactions concluded pursuant to ISDA master Agreements and Global Master Repurchase Agreements. The legal opinion was commissioned by Frontclear and written by Zambian based law firm Corpus Legal Practitioners.

Frontclear has become increasingly aware of the strong demand for interbank market education in Zambia. Frontclear’s technical assistant program (FTAP) is designed to facilitate trainings and knowledge sharing in such markets. A derivatives boot camp training and ISDA workshop, both tailor made to the Zambian market’s requirements, will take place in Lusaka this month.

For further information on this legal opinion, please email info@frontclear.com

Erik Zambia

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