Frontclear, Fidelity Bank Ghana and Societe Generale completed a USD40-million cross-currency total return swap transaction. The trade marks a first-of-its-kind cross-border deal in Ghana and follows-on Frontclear’s two-year technical assistance to the country’s money market development.
Cross-border transactions in Ghana typically face operational and legal challenges, such as constraints to use local currency securities, enforceability concerns on key legal provisions of ISDA and GMRA documentation, cumbersome settlement processes and the economics of executing small trades in challenging markets.
The one-year cross-currency transaction is structured as a total return swap (TRS) involving an exchange of USD cash funding to Fidelity in exchange for Ghanaian Cedi government bond collateral. The bonds were transferred Free-of-Payment (FoP) at the local Central Securities Depository, an innovation facilitated through the support of local regulators. The transaction is 100% guaranteed by Frontclear.
“The Ghanaian authorities and market participants are making notable progress in developing their local capital markets and Frontclear is proud to have supported these efforts with its technical assistance program in the past two years. The success of this deal confirms that with the right blend of institutions, instruments and market knowledge, local banks can competitively access and benefit from the international capital markets.” – Hugh Friel, Vice President Frontclear
“This trade not only allows Fidelity to diversify our funding sources but also paves the way for local market-wide use of Government of Ghana local currency security in multi-currency collateralized financing solutions for tenors beyond overnight. To get a transaction like this across the line for the first time required a lot of support from our global partners, local regulators and the Central Securities depository – Another first for Fidelity Bank Ghana Limited. Leading the development of local broad based solutions with support of our local and offshore partners is at the heart of what we do at Fidelity Bank. It is our vision to be a world-class financial institution with the ability to adapt world-class innovation for local application in a bid to positively impact Ghanaian businesses as a basis for driving an inclusive economic growth.” – Sam Kwame Aidoo, Group Head Wholesale Bank, Fidelity Bank Ghana
“This is Societe Generale’s first cross-currency total return swap in Ghana. It demonstrates how Societe Generale is expanding its offering of collateralised financing solutions, one of the key strengths of its markets’ franchise, by adapting the underlying, the jurisdiction and the format, and by partnering with development institutions like Frontclear. This transaction also illustrates Societe Generale’s commitment, made through its “Grow with Africa” program, to foster positive transformation across the African continent. We are delighted of this first transaction with Fidelity Bank Ghana and Frontclear,” comments Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale