Frontclear and Banesco Banco Múltiple, S. A. close a market first GMRA documented cross-border DOP repo against DOP-denominated collateral

Frontclear and Banesco concluded a USD 10 million synthetic DOP repo, using locally issued, DOP-denominated Dominican Republic Ministry of Finance and Central Bank bond collateral. This trade is the first ever DOP funded cross-border repo trade in the Dominican Republic with a bank as the borrower and against local currency collateral. With the help of The Currency Exchange Fund (TCX), Frontclear managed to swap Dollars for Dominican Peso funding and therefore offer Banesco liquidity with no embedded FX risk. 

The repo transaction is documented under standard GMRA 2011 and funded by FCC Securities (a 100% owned subsidiary of Frontclear), which established local custody infrastructure to secure title transfer of the collateral and DOP cash. The successful conclusion of this landmark trade demonstrates firsthand the benefits of using international market standard documentation including clarity on key aspects such as title transfer of collateral and enforceability of GMRA provisions in a close-out scenario. 

Money markets are the most fundamental layer of financial markets, supporting maturity transformation and responsible lending practices of banks, deepening of government security markets, and allowing for effective transmission of monetary policy signals. 

“This repo trade serves as a pivotal moment for the Dominican Republic money market. We are proud to have offered Banesco synthetic local currency funding against a basket of locally issued, local currency bonds as collateral. This structure works because Frontclear has built the necessary local custody and cash account infrastructure needed to secure local currency repos and we firmly believe it will be the first of many structures of this type.” 
– Daniel Baeza, SVP Frontclear 

"We are delighted to have partnered with Frontclear on this groundbreaking repo transaction. This innovative structure provides us with valuable liquidity without exposing us to FX risk. By leveraging locally issued bonds as collateral, we enhance our funding strategies and capitalize on favorable rates, enabling us to expand our asset base. From a sector perspective, this transaction represents a significant advancement in bolstering the resilience and growth of the local financial ecosystem." 
– Javier Vargas, Treasurer, Banesco Banco Múltiple, S. A. 

“This repo transaction in DOP is an important capital market development for the Dominican Republic. It allows local banks such as Banesco to do repos with offshore institutions, opening up new pools of liquidity that they can tap. As a development finance initiative, TCX was able to provide the USD for DOP currency swap in a market with no alternative swap provider. We look forward to collaborating with Frontclear on more transactions and supporting the development of repo offshore operations.” 
– Julian Carvajal, VP of Trading (Latin America), TCX