Frontclear Facilitates a Landmark Transaction With State Bank Mongolia, EBRD and ING Bank

AMSTERDAM, July 19, 2018 /PRNewswire/ --

Frontclear arranged and structured a USD 30 million cross-border collateral swap with the European Bank for Reconstruction and Development (EBRD), enabling a further repo transaction between the Mongolian State Bank and ING Bank. It is the first time in Mongolia that a repo or collateral swap transaction has been done with local currency collateral cross border and a first such deal involving a commercial bank. 

In this transaction, Frontclear borrowed USD 30 million in US Treasury bonds from the EBRD and then on-lent them to the State Bank LLC in Mongolia against Mongolian local currency government bonds in a collateral swap transaction. Frontclear guaranteed the transaction to EBRD. With the US Treasuries in hand, State Bank LLC borrowed funds in a repo transaction with ING Bank N.V. Singapore branch.

Credit risk, legal and operational risks plus wrong way risk concerns, has made it very difficult for Mongolian banks to source hard currency liquidity against local collateral in global capital markets. The landmark transaction made it possible for State Bank LLC to competitively access funding from foreign banks. It also helped clarify certain legal and operational issues related to bond trading in Mongolia, which were mitigated by effective Frontclear deal arranging and structuring.  

Both collateral swap transactions were documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customized the swap confirmation to legal issues in the Mongolian market. The repo transaction was closed under a Global Master Repurchase Agreement (GMRA). The transaction documents introduced best practice operational and legal concepts, which will be further reviewed in a Frontclear organized Executives' Roundtable in Ulaanbaatar in September 2018.

"We are proud of the catalyst role we have played in originating the structure. The transaction provides a new mechanism for Mongolian banks to utilize local collateral in international capital markets and sets a benchmark for the development of Mongolia's money market going forward."-Andrei Shinkevich, SVP Frontclear 

"We expect this transaction to generate positive ramifications for Mongolia as it enabled know-how transfer to the local market and should have a demonstration effect on other potential followers from global financial markets."-Aude Pacatte, Director, Head of Portfolio Management EMEA, EBRD 

"State Bank is delighted for successfully executing this inaugural transaction that provides possibilities to practice the financial instrument in line with international best practice and facilitates development of interbank money market in broader perspective in Mongolia."-Chinbat Lkhagvasuren, Director General, Treasury Department, State Bank of Mongolia    

"We are proud to have been given the opportunity to play an instrumental role in the further development of the capital market in Mongolia, together with State Bank of Mongolia, Frontclear, and EBRD."-Erik Versavel, ING Mongolia Country Head 

About Frontclear  

Frontclear is a development finance company focused on catalyzing stable and inclusive interbank markets in emerging and developing countries (EMDC). Frontclear facilitates access by local financial institutions to interbank markets through providing credit guarantees to cover a transacting institution's counterparty credit risk. This on the condition that local currency assets can be used for collateral management purposes. Frontclear's Basel III compliant guarantees specifically cover due payment of the Early Termination Amount under ISDA contracts and corresponding claims under GMRA. The guarantees are in turn counter-guaranteed by KfW, a AAA-development financial institution. The guarantees are complemented by a technical assistance programme (FTAP). FTAP supports targeted and planned interventions in bank and system development, which reduce the operational and country risks obstructing interbank trading. European Bank for Reconstruction and Development (EBRD), the Dutch development bank FMO, the Financial Sector Deepening Africa (FSDA), the French development bank Proparco, The Currency Exchange Fund (TCX), the UK's Department of International Development (DFID) and the German Ministry of Development Cooperation (BMZ). Frontclear's guarantees are counter-guaranteed by KfW, a AAA-rated German development Bank.

For further information, please visit http://www.frontclear.com

About EBRD 

The EBRD is a multilateral bank that promotes the development of the private sector and entrepreneurial initiative in 38 economies across three continents. The Bank is owned by 67 countries as well as the EU and the EIB. EBRD investments are aimed at making the economies in its regions competitive, inclusive, well-governed, green, resilient and integrated. Follow us on the web, Facebook, LinkedIn, Instagram, Twitter and YouTube.

About State Bank LLC 

The State Bank is a state-owned commercial bank, established pursuant to decree of the Government of Mongolia. Since its establishment, the Bank has been contributing to the overall banking system through its successful operations that cater the financial needs of its customers, both retail and corporate, in a reliable and timely manner, leveraged by its skilled personnel and advanced technology. The State Bank is Mongolia's one of six systematically important banks and it maintains the strongest nationwide retail banking presence in Mongolia.

About ING  

ING is a global financial institution with a strong European base, offering banking services through its operating company ING Bank. The purpose of ING Bank is empowering people to stay a step ahead in life and in business. ING Bank's more than 51,000 employees offer retail and wholesale banking services to customers in over 40 countries. ING Group shares are listed on the exchanges of Amsterdam (INGA NA, INGA.AS), Brussels and on the New York Stock Exchange (ADRs: ING US, ING.N).

Sustainability forms an integral part of ING's strategy, evidenced by ING's ranking as a leader in the banks industry group by Sustainalytics. ING Group shares are included in the FTSE4Good index and in the Dow Jones Sustainability Index (Europe and World), where ING is also among the leaders in the banks industry group. 

ING Wholesale Banking has an international network in 40 countries with key positions in Structured Finance and Financial Markets. In Asia Pacific ING is active and present in 14 major markets, namely Australia, China, Hong Kong SAR, India, Indonesia, Japan, Malaysia, Mongolia, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. ING's presence in Asia Pacific also includes a 13% stake in Bank of Beijing, China; a 3.74% stake in Kotak Mahindra Bank, India; a 30% stake in TMB Bank, Thailand as well as wholly owned ING Australia that offers retail and wholesale banking services.

SOURCE Frontclear

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Milbank Acts on Successful Exchange Offer and New Issuance by the Government of Mongolia

HONG KONG, March 14, 2017 /PRNewswire/ -- Milbank, Tweed, Hadley & McCloy LLP advised Credit Suisse and J.P. Morgan as dealer managers and initial purchasers in a US$600 million sovereign bond exchange offer and new issuance by the Government of Mongolia.

The transaction was successfully completed amid highly challenging economic circumstances. Mongolia has faced potential liquidity issues over the past year related to slower economic growth, mainly as a result of the country's dependence on commodities which have suffered from slumping prices. Initially the Government was able to secure preliminary approval from the International Monetary Fund ("IMF") for a package of relief measures, which gave the exchange offer and new issue strong momentum in the market.

Despite challenges which included an extremely tight deadline, the ongoing IMF discussions and rapidly approaching maturity of the Development Bank of Mongolia ("DBM") bonds in March 2017, the transaction was successfully completed on very favorable terms that achieved all of the Government's objectives. Approximately $476 million in new sovereign Government bonds were exchanged for outstanding DBM bonds, while an additional $124 million in new Government bonds were issued for cash.  Holders of more than 80% of outstanding DBM bonds agreed to remain in the credit by exchanging for new Government bonds at a yield of 8.75%. Meanwhile new Government bonds were issued for cash at a premium of 106.016%, with the proceeds to be used for further repurchases of remaining DBM bonds.

Capital Markets partner Jim Grandolfo led the Hong Kong-based Milbank team, which included counsel Paul Pery, senior associate Kurt Sherwood and associates Adam Heyd and York Wu.

Mr. Grandolfo commented: "Despite the challenging economic conditions, the Government of Mongolia, with the assistance of our clients Credit Suisse and J.P. Morgan, was able to successfully address the concerns of the IMF and its international investor base to achieve their objectives, all within a limited timeframe. This marks an incredible turnaround for the Government and the country of Mongolia, providing what we hope will be a strong basis for long-term, sustained economic recovery. We are pleased to support our clients Credit Suisse and J.P. Morgan and the Government of Mongolia on a transaction of such national importance."

About MilbankMilbank, Tweed, Hadley & McCloy LLP is a leading international law firm that provides innovative legal services to clients around the world. Founded in New York 150 years ago, Milbank has offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, Munich, São Paulo, Seoul, Singapore, Tokyo and Washington, DC. Milbank's lawyers collaborate across practices and offices to help the world's leading commercial, financial and industrial enterprises, as well as institutions, individuals and governments, achieve their strategic objectives. For more information please visit www.milbank.com.

From:  Jocelyn De Carvalho, Public Relations Manager; 212-530-5509; 

jdecarvalho@milbank.com

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US State Secretary Rex W.Tillerson congratules Mongolia on behalf of President Trump on Lunar New Year Occcasion

On behalf of President Trump and the American people, we send our best wishes to the people of Mongolia as you gather with your families and friends to celebrate Tsagaan Sar on February 27.

I hope that the new year brings you prosperity and success, and that the close ties between the American and Mongolian peoples continue to deepen as we mark the 30th anniversary of diplomatic relations between our countries.

Source: US State Department

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IMF Reaches Staff-Level Agreement with Mongolia on Three-Year Extended Fund Facility

February 19, 2017

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

A staff team of the International Monetary Fund (IMF) led by Koshy Mathai visited Ulaanbaatar during February 1-19 to continue discussions with the Mongolian authorities on a set of economic policies that could be supported by IMF financial assistance. At the end of the visit, Mr. Mathai made the following statement:

“The Mongolian government and the IMF team have reached staff-level agreement on an economic and financial program to be supported by a three-year Extended Fund Facility (EFF) for SDR 314.505 million (435 percent of quota), or about $440 million. Other international partners also plan to support the government’s program: the Asian Development Bank (ADB), World Bank, and bilateral partners including Japan and Korea are together expected to provide up to $3 billion in budget and project support; and the People’s Bank of China is expected to extend its RMB 15 billion swap line with the Bank of Mongolia for at least another three years.

“The total external financing package will thus be around $5.5 billion and will support the authorities’ “Economic Stabilization Program,” which intends to restore economic stability and debt sustainability as well as to create the conditions for strong, sustainable, and inclusive growth, while protecting the most vulnerable citizens.

“This agreement is subject to the confirmation of financing assurances, the completion of prior actions by the authorities, and the approval of the IMF Executive Board. The Board is expected to consider Mongolia’s request in March.

“Mongolia is well endowed with mineral resources, strong potential in agriculture and tourism, and a young and dynamic population. Its long-run future is promising, but in recent years it has been hit hard by the sharp decline of commodity prices and a collapse in foreign direct investment (FDI). Attempts to stem the decline through expansionary policies proved ineffective after a few years, and the economy is now stagnating, weighed down by high debt and low foreign-exchange reserves.

“Fiscal consolidation is a key priority, as loose fiscal policy in the past was a major driver of Mongolia’s current economic difficulties and high debt. Budget deficits will be reduced steadily, while priority social spending will be maintained: for instance, the savings from better targeting the Child Money Program will be used entirely to increase spending on the food stamp program for the most vulnerable. Also, to boost revenue, the personal income tax will be made more progressive, with rates on only higher-income households increased.

“The Development Bank of Mongolia (DBM) will henceforth operate in an independent, purely commercial manner, as laid out in the recently passed DBM law, and the Bank of Mongolia (BOM) will not engage in additional quasifiscal activity, with the mortgage program now operating essentially as a revolving fund. In addition, the law on concession projects will be reformed, and the public investment program (PIP) will be rationalized and better aligned with national development priorities.

“The authorities will adopt a set of important fiscal reforms to ensure that budget discipline is maintained, building on the existing framework for fiscal responsibility. These include the creation of a Fiscal Council to provide independent budget forecasts and costings of new policy proposals, and provisions to give the government sole authority to determine the total amount of spending in the budget, as well as to require Ministry of Finance approval of any proposals to cabinet with a budgetary cost.

“Monetary policy will remain appropriately tight, given the objective of price stability. Over time, however, as the economy normalizes, it may be appropriate to cut the policy rate if external and inflation indicators permit. The exchange rate will continue to move flexibly, with intervention limited to smoothing excessive volatility and preventing disorderly market conditions. A major priority will be the adoption of a new BOM law to clarify its mandate, strengthen governance, and improve independence.

“Strengthening the banking system is a crucial part of the program, to ensure that the banks can support sustainable and inclusive economic growth. The authorities’ first priority is to undertake a comprehensive diagnosis of the banking system to assess institutions’ financial soundness and resilience. With the results of this diagnostic in hand, the BOM will engage banks to ensure appropriate restructuring and recapitalization, as necessary. The BOM will complement these actions by strengthening the regulatory and supervisory framework, and government is committed to improving the deposit insurance system. The authorities are also committed to strengthening the regime for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).

“The authorities intend directly to boost economic activity and prospects by attracting new investment to major mines, and by implementing an array of structural reforms to promote economic diversification and improve competitiveness, especially in agriculture and tourism. The broad range of reforms envisaged under the program have been developed in close collaboration with the World Bank and ADB.

“The authorities’ adjustment and structural reform program, supported by the large package of external financing, is expected to stabilize the economy and lay the basis for sustainable, inclusive, long-run growth. By 2019, growth is projected to pick up to around 8 percent, as economic and financial conditions improve and key mining projects take off. Foreign exchange reserves should rise to a healthy $3.8 billion (above 6 months of imports) by the end of the program, similar to levels seen in 2012, before Mongolia was hit by external shocks. Fiscal consolidation will leave room for the banking sector, over time, to extend more credit to the private sector, consistent with projected growth. These policies would also put public debt on a declining path over the course of the program.

“The government’s recently announced plan to engage with its private external creditors to secure financing assurances for the program should help restore debt sustainability. Specifically, the financing parameters of the program assume that external private creditor exposure will be maintained at its current level over the program period, on terms consistent with debt sustainability, and gross financing needs will remain at prudent levels during the post-program period.

“On behalf of the staff team, I would like to thank the authorities for their warm welcome, and the constructive discussions and excellent collaboration we have had over recent months, bringing us to today’s successful conclusion.”

Source:IMF

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Factsheet on the EU-Mongolia Framework Agreement on Partnership and Cooperation

The Framework Agreement on Partnership and Cooperationbetween the European Union and Mongolia is testimony to the growing importance of EU-Mongolia relations, which are based on the shared values of democracy, rule of law and human rights and respect for international commitments in this regard. It will provide the basis for a broader and more effective engagement by the EU and its Member States with Mongolia moving forward.

The Framework Agreement consists of 65 Articles with a Preamble and nine Titles, which cover:

1.    the nature and scope of the Agreement;

2.    bilateral, regional and international cooperation;

3.    cooperation on sustainable development;

4.    cooperation on trade and investment issues;

5.    cooperation in the area of justice, freedom and security;

6.    cooperation in other sectors;

7.    means of cooperation;

8.    the institutional framework;

9.    final provisions

The Agreement provides a general framework for promoting bilateral, regional and international cooperation and includes the EU’s standard political clauses on human rights, weapons of mass destruction (WMDs), the International Criminal Court (ICC), small arms and light weapons (SALWs) and counter-terrorism.

The Agreement will strengthen political, economic and sectoral cooperation across a wide range of policy fields, including trade and investment, sustainable development, justice, freedom and security. It encompasses areas such as cooperation on principles, norms and standards, raw materials, migration, organised crime and corruption, industrial policy and small and medium-sized enterprises cooperation, tourism, energy, education and culture, environment, climate change and natural resources, agriculture, health, civil society, and the modernisation of the state and public administration.

The negotiations for the EU-Mongolia Framework Agreement on started in 2010 and were concluded in 2013. On 15 February 2017, the European Parliament gave its consent to conclude the. This vote by the European Parliament was an important step in concluding the Agreement and paves the way for its entry into force.

Once it enters into force, The Agreement will supersede the current legal framework of the 1993 Agreement on Trade and Economic Cooperation between the European Economic Community and Mongolia.

Find the full text of the Framework Agreement on Partnership and Cooperation

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European Union brings relief to Mongolian herders affected by extreme winter conditions

Ulaanbaatar, February 10th, 2017 – In response to the particularly harsh winter which has struck large parts of Mongolia since November, the European Commission is providing over 115 000 EUR in humanitarian funding to bring immediate relief to the most affected families. The aid will directly benefit 5000 most vulnerable individuals in some of the country’s worst-hit provinces, namely Khuvsgul, Selenge, Uvs and Zavkhan.

This EU funding supports the Mongolian Red Cross Society in delivering much-needed assistance through the provision of first aid kits and unconditional cash grants. The kits enable herders to maintain their physical well-being in particularly challenging conditions, while cash assistance allows beneficiaries to cover other immediate needs triggered by the extreme climatic conditions, following their own priorities. The funding is part of the EU’s overall contribution to the Disaster Relief Emergency Fund (DREF) of the International Federation of Red Cross and Red Crescent Societies (IFRC).

Vast swathes of Mongolia, particularly in the north, have witnessed an exceptionally cold winter and heavy snow fall over the past few months. The premature severe weather patterns have placed an estimated 157 000 people in 15 out of 21 provinces under high risk of the what is known as the “dzud” climatic phenomenon. The adverse conditions have hampered the capacity of herders to access town centres, where health facilities and other services are located, and threatened the survival of livestock. The Government of Mongolia in late December called for humanitarian assistance from the international community as the situation worsened.

Dzud, characterised by a prolonged summer drought followed by severe winter conditions, is not uncommon in Mongolia. The latest dzud in late 2015 killed more than one million heads of livestock and severely affected thousands of pastoralists whose livelihoods largely depended on animal husbandry. In response, the Commission had provided 420,000 EUR to its humanitarian partners in order to help alleviate the burdens of the most impacted households.

Background

The European Union together with its Member States is the world's leading donor of humanitarian aid. Relief assistance is an expression of European solidarity towards people in need around the world. It aims to save lives, prevent and alleviate human suffering, and safeguard the integrity and human dignity of populations affected by natural disasters and man-made crises. The European Commission through its Humanitarian Aid and Civil Protection department (ECHO) helps over 120 million victims of conflicts and disasters every year. For more information, please visit ECHO's website.

The European Commission has signed a €3 million humanitarian delegation agreement with the International Federation of Red Cross and Red Crescent Societies (IFRC) to support the Federation's Disaster Relief Emergency Fund (DREF). Funds from the DREF are mainly allocated to “small-scale” disasters – those that do not give rise to a formal international appeal.

The Disaster Relief Emergency Fund was established in 1985 and is supported by contributions from donors. Each time a National Red Cross or Red Crescent Society needs immediate financial support to respond to a disaster, it can request funds from the DREF. For small-scale disasters, the IFRC allocates grants from the Fund, which can then be replenished by the donors. The delegation agreement between the IFRC and ECHO enables the latter to replenish the DREF for agreed operations (that fit in with its humanitarian mandate) up to a total of €3 million.

For further information, please contact: Pierre Prakash, Regional Information Officer for Asia and the Pacific, European Civil Protection and Humanitarian Aid Operations (ECHO): Pierre.Prakash@echofield.eu

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