CBA and SBSA kickstart Kenya鈥檚 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 鈥榟orizontal repo鈥�, 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: 鈥淲ith this transaction, SBSA, CBA and Frontclear worked together as partners to develop Kenya鈥檚 domestic financial markets.鈥�
鈥淭he 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.鈥�
鈥淲e see this type of transaction as key to developing deep and liquid financial markets in Kenya and across Africa as a whole.鈥�
Raphael Agung, head of treasury at CBA, added: 鈥淭his repo transaction has allowed us to term out our funding by a considerable magnitude thereby infusing the much needed stability to our balance sheet.鈥�
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 鈥榟orizontal repo鈥�, 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: 鈥淲ith this transaction, SBSA, CBA and Frontclear worked together as partners to develop Kenya鈥檚 domestic financial markets.鈥�
鈥淭he 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.鈥�
鈥淲e see this type of transaction as key to developing deep and liquid financial markets in Kenya and across Africa as a whole.鈥�
Raphael Agung, head of treasury at CBA, added: 鈥淭his repo transaction has allowed us to term out our funding by a considerable magnitude thereby infusing the much needed stability to our balance sheet.鈥�
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