Key terms and conditions are as follows:
Guarantee scope: Basel III compliant guarantee covering the early termination amount (mark to market value of the guaranteed transactions less market value of collateral) on close out. Frontclear guarantees the liquidity of the collateral by acting as a buyer of last resort upon close out.
Eligible obligors: Frontclear issues guarantees on regulated financial institutions (both bank and non-bank financial institutions) and financial infrastructure providers (central banks, central security depositories and central clearing counterparties) in emerging and frontier economies.
Instruments: Local currency and cross currency repurchase transactions, securities financing transactions, derivatives (FX forwards, FX swaps, cross currency swaps and interest rate swaps), Collateral Swaps, Trade finance instruments such as confirming letters of credit.
Guarantee maximum amount: Up to USD 40 million per obligor, up to 100% of exposure. First loss guarantees of up to USD 20 million with no limit on trade notional.
Eligible collateral: Guarantees by Frontclear are subject to the obligor posting collateral on acceptable terms. Eligible collateral varies from country to country but is typically limited to USD cash, local currency cash and local government securities such a treasury bills and bonds.
Documentation: Guarantee is documented under Frontclear’s Guarantee Framework Agreement entered into between the beneficiary of the guarantee and Frontclear. The underlying transaction being guaranteed is typically documented under ISDA or GMRA or custom bespoke documentation.
For more information, please contact the sales and structuring team.