Fidelity Bank Ghana, Societe Generale and Frontclear, completed a USD 40-million repo trade, using Ghanaian Cedi government bond collateral.
This trade is the first-ever Global Master Repurchase Agreement (GMRA)-documented trade in Ghana and has been made possible thanks to positive regulatory developments such as the recent Bank of Ghana’s ‘Guidelines for Repurchase Agreements in Ghana’ as well as improved capacity within the local market.
The one-year cross-currency repo transaction is documented under standard GMRA 2011, as now mandated by Bank of Ghana (BOG) for any repo trades in Ghana.
Typically, a repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.
The successful conclusion of this landmark trade, just one month after the publication of the repo guidelines, demonstrates firsthand the benefits of using internationally accepted documentation and the importance of providing clarity on key aspects such as title transfer of collateral and enforceability of GMRA provisions in a close-out scenario.
“Frontclear is proud to play a role in delivering the first-ever true repo trade documented under standard GMRA with our partner banks. Our success in closing this trade is testament to the commendable efforts of the Ghanaian authorities and market participants to develop Ghana’s capital markets, efforts which Frontclear has been contributing to via its technical assistance program over the past three years. We hope that this trade sends a strong statement of support that will spur further activity in the repo space.” – Hugh Friel, Vice President, Frontclear
“Another first for Fidelity Bank Ghana Limited as we continue to work hand in hand with our global partners, local regulators and the Central Securities Depository to drive local market development. Not only does the new GMRA framework afford us the ability to tap new funding sources (local and offshore) but also more importantly, it achieves this in a timely, cheaper and more predictable manner. This gives leading banks in Ghana like Fidelity Bank Ghana Limited, the needed flexibility to continue to support a number of industries that drive Ghana’s real economy.
According to Sam Kwame Aidoo, Deputy Managing Director, Wholesale Bank, Fidelity Bank Ghana as the bank continues to build global partnerships, it sees the importance of leading the way in providing access to secure and flexible short-term investment opportunities for global partners in Ghana while simultaneously accelerating the widespread adoption of internationally acceptable standards such as the GMRA in Ghana’s financial markets.
Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions, Societe Generale on his part stated that: “Following the first cross-currency total return swap in Ghana closed one year ago, Societe Generale is pleased to extend its capabilities and to be part of this first-ever GMRA-documented repo transaction in Ghana with Fidelity Bank Ghana and Frontclear.
This cross-currency repo adds to the existing set of collateralised financing solutions proposed by the Bank in this country and illustrates its tailor-made approach to serve its clients with innovative market solutions.”