CBA and SBSA kickstart Kenya’s repo market
04 April 2016 Nairobi
Image: Shutterstock
A first-of-its-kind East African cross-currency repo transaction between Commercial Bank of Africa (CBA) and Standard Bank of Southern Africa (SBSA), worth $25 million, was completed in March.
CBA received $25 million in one-year funding from SBSA and provided Kenyan government bonds as collateral.
The deal was facilitated and guaranteed by Dutch clearinghouse Frontclear, and includes a guarantee to SBSA to cover any residual credit risk on the transaction.
The transaction was executed under a standard International Swaps & Derivatives Association agreement and assumes transfer of legal ownership of the collateral instruments.
This is a step-up from the Kenyan ‘horizontal repo’, which is based on a pledge of a security and does not furnish the same comfort with regard to mitigating credit risk, nor does it ensure the wider benefits of a liquid repo market, according to SBSA, CBA and Frontclear.
Reggie Mlangeni, regional head East Africa, client solutions at SBSA, said: “With this transaction, SBSA, CBA and Frontclear worked together as partners to develop Kenya’s domestic financial markets.”
“The market development initiative and focus of Frontclear assisted with lobbying the various regulating bodies in Kenya as a collective. We were able to transact under global industry-standard documentation.”
“We see this type of transaction as key to developing deep and liquid financial markets in Kenya and across Africa as a whole.”
Raphael Agung, head of treasury at CBA, added: “This repo transaction has allowed us to term out our funding by a considerable magnitude thereby infusing the much needed stability to our balance sheet.”
CBA received $25 million in one-year funding from SBSA and provided Kenyan government bonds as collateral.
The deal was facilitated and guaranteed by Dutch clearinghouse Frontclear, and includes a guarantee to SBSA to cover any residual credit risk on the transaction.
The transaction was executed under a standard International Swaps & Derivatives Association agreement and assumes transfer of legal ownership of the collateral instruments.
This is a step-up from the Kenyan ‘horizontal repo’, which is based on a pledge of a security and does not furnish the same comfort with regard to mitigating credit risk, nor does it ensure the wider benefits of a liquid repo market, according to SBSA, CBA and Frontclear.
Reggie Mlangeni, regional head East Africa, client solutions at SBSA, said: “With this transaction, SBSA, CBA and Frontclear worked together as partners to develop Kenya’s domestic financial markets.”
“The market development initiative and focus of Frontclear assisted with lobbying the various regulating bodies in Kenya as a collective. We were able to transact under global industry-standard documentation.”
“We see this type of transaction as key to developing deep and liquid financial markets in Kenya and across Africa as a whole.”
Raphael Agung, head of treasury at CBA, added: “This repo transaction has allowed us to term out our funding by a considerable magnitude thereby infusing the much needed stability to our balance sheet.”
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