JANUARY 2019 – Frontclear arranged and structured back-to-back USD/JPY cross-border cross currency swap transactions for the value of USD 30 million with Societe Generale and Development Bank of Mongolia.
Credit, legal and operational risks have made it very difficult for Mongolian banks to access global capital markets. This second landmark transaction of Frontclear in Mongolia has made it possible for Development Bank of Mongolia LLC (DBM) to competitively access the swap market with foreign banks and hedge the proceeds of a Samurai bond issue into USD. Both cross currency swap transactions were documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customized the swap confirmation to overcome legal issues in the Mongolian market.
The transactions helped to further clarify certain legal issues related to close-out netting in Mongolia, which were mitigated by effective Frontclear deal arranging and structuring. The transaction documents introduced best practice operational and legal concepts, which were reviewed and discussed in a Frontclear organized Executives’ Roundtable in Ulaanbaatar in September 2018. Frontclear is already planning further technical assistance in Mongolia to address those legal issues as well as other roadblocks preventing Mongolian banks effecting accessing global funding and swap markets.
“We are proud to execute our second transaction in Mongolia and the key role we have played in originating the structure and bringing Société Générale to work in money market transactions in the country. The transaction strengthens Mongolian banks’ ability to mitigate legal and operational risks and sets a benchmark for the development of Mongolia’s money market going forward,” according to Andrei Shinkevich, Senior VP at Frontclear.
“This is DBM’s first ever swap transaction with Societe Generale and we look forward to working with new partners to expand our treasury operation,” Amgalan Battulga, Head of Treasury Management of Development Bank of Mongolia noted.
“Societe Generale is delighted to have concluded this transaction with Frontclear allowing Development Bank of Mongolia to hedge interest rate and currency risks related to its Samurai bond. It illustrates the strength of the collaboration between our two institutions, Societe Generale and Frontclear, which share the common objective to participate to the development of capital markets in emerging countries,” Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale said.