Washington, D.C., March 23, 2003—
The International Finance Corporation, the private sector arm of the World Bank Group, and Deutsche Bank (DB) today signed a financing agreement for the US$250 million East Asia Local Currency Swap Facility. It will provide local corporations and financial institutions with better access to the swap markets and help to better manage their foreign exchange risk.
This first-of-its-kind transaction will enable DB to undertake larger and longer dated swaps and expand its client base to a wider range of local institutions. IFC will guarantee a portion of any losses on eligible transactions borne by DB under this facility. Longer-dated transactions with at least one local currency component will be eligible, providing DB clients with hedging tools. Corporations and financial institutions incorporated in Indonesia, the Philippines and Thailand will be targeted by this facility at its outset.
“This risk sharing facility helps increase market capacity for longer term local currency hedging products,” said Nina Shapiro, IFC vice president of finance and IFC treasurer. Karl Voltaire, IFC director for global financial markets, added, “By encouraging DB to extend credit limits and tenors and making these products accessible to a wide range of borrowers, this facility provides local companies with risk management tools they need to better manage their balance sheets. This facility also will add liquidity and depth to the regional swap markets and provide a stimulus to local capital markets.”
Extending the duration of products and liquidity in local derivatives markets is a priority for DB. "In the post-Asian crisis era, DB has recognized an increased responsibility to remain at the forefront of financial market development in Asia’s local markets,” said Bryan Yap, managing director and co-head for fixed income derivatives trading in Asia. DB is a leading provider of credit derivative and risk management products in major Asian markets. It provides a range of corporate and investment banking, private client and asset management products and services. DB is one of the largest group of financial and banking institutions worldwide, with total assets of €758 billion on Dec. 31, 2002.
Mr. Yap noted that DB has worked closely with domestic regulators and finance ministries and participated in numerous market forums to promote market development. This commitment has translated into a primary dealer role for DB in domestic government bond markets and a strong ranking in the derivative industry from peers and clients.
IFC has also put a priority on developing local capital markets to ensure better access to capital by local companies and to help them develop the capacity to better manage foreign currency risk. Mr. Yap added, “In this context, we are extremely pleased to further this effort with IFC. Our missions complement one another.”
The mission of IFC is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
