SG and Frontclear foster development of money markets in Ghana and Mongolia with swap firsts


SG completed cross currency swaps for financial institutions in Ghana and Mongolia in January, further assisting in the development of local financial markets while also maintaining momentum for its ‘Grow with Africa' programme.

Societe Generale has completed the first cross-currency, total return swap in Ghana, along with Fidelity Bank Ghana and Frontclear, a development finance company. The one-year, US$40m swap offers US dollar-denominated cash funding to Fidelity in return for Ghanaian Cedi government bonds, with the latter transferred free of payment at the local Central Securities Depositary in a deal that is 100% guaranteed by Frontclear.

SG originated the interest with the Ghanaian bank, is the swap counterparty against FCC Securities BV and receives a guarantee on the total return swap from Frontclear. FCC Securities has a back-back trade with Fidelity Bank Ghana.

The development finance company has spent the last two years working with regulators on a technical assistance programme for the development of the local money market in Ghana. "The transaction is a further illustration of SG's commitment, through its ‘Grow with Africa' programme, to foster positive transformation across the African continent," said Jérôme Sabah (pictured), global head of rates, credit and forex sales for financial institutions at SG.

The coupons on the local government bonds are paid to FCC Securities BV, the counterparty and a special purpose vehicle created by Frontclear to intermediate transactions in countries where the netting opinion has yet to be divined.

SG and Frontclear have also joined with the Development Bank of Mongolia for a back-to-back, cross-border cross currency (US dollar/Japanese yen) swaps created to hedge a portion of the interest rate and currency risk on a ¥30 billion (US$277m) due 2023 Samurai bond that was issued by the Mongolian bank in December 2013.

Taking similar roles to those it had on the Ghana deal, SG acts as swap counterparty with FCC Securities BV and receives a guarantee from Frontclear, while FCC Securities has a back-to-back trade with the Development Bank of Mongolia.

The swap transactions were documented under an International Swap and Derivatives Association agreement, through which the development agency customised the swap confirmation to overcome legal issues in the Mongolian financial market and offered further clarification for close-out netting.

The trade was originated by Frontclear on the back of a previous trade it completed earlier last year in Mongolia. "The transaction illustrates the strength of our collaboration with Frontclear, which shares the common objective of participating in the development of capital markets in emerging countries," said Sabah.