Frontclear facilitates a transaction with Development Bank of Mongolia and Societe Generale
EconomyUlaanbaatar/MONTSAME/ 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 Societe Generale 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,” says Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale said.
source: Development Bank of Mongolia