Regional : Enabling close-out netting in derivatives transactions and use of international standard contracts in financial markets
The TA's objective is deeper and more inclusive financial sectors in selected ADB developing member countries (DMCs), with greater liquidity in financial transactions within and across their borders. This objective is consistent with ADB's Strategy 2030; in particular, the objectives of expanding private sector operations through increasing access to capital markets and enhancing domestic resource mobilization through developing capital markets to help channel savings more effectively for productive investments. The TA will achieve this by deepening knowledge and building expertise of close-out netting in derivatives transactions in government and private sector and of the use of international standard contracts in local financial markets by market participants. If requested by a DMC, the TA will support reforms to improve the legal and regulatory basis for close-out netting which is fundamental for the development of well-functioning derivatives markets.
Project Details
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Project Officer
McBride, Nicholas
Office of the General Counsel
Request for information -
Country/Economy
Regional -
Sector
- Finance
| Project Name | Enabling close-out netting in derivatives transactions and use of international standard contracts in financial markets | ||||
| Project Number | 54466-001 | ||||
| Country / Economy | Regional Indonesia Kazakhstan Sri Lanka Uzbekistan |
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| Project Status | Closed | ||||
| Project Type / Modality of Assistance | Technical Assistance |
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| Source of Funding / Amount |
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| Operational Priorities | OP1: Addressing remaining poverty and reducing inequalities OP6: Strengthening governance and institutional capacity OP7: Fostering regional cooperation and integration |
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| Sector / Subsector | Finance / Money and capital markets |
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| Gender | No gender elements | ||||
| Description | The TA's objective is deeper and more inclusive financial sectors in selected ADB developing member countries (DMCs), with greater liquidity in financial transactions within and across their borders. This objective is consistent with ADB's Strategy 2030; in particular, the objectives of expanding private sector operations through increasing access to capital markets and enhancing domestic resource mobilization through developing capital markets to help channel savings more effectively for productive investments. The TA will achieve this by deepening knowledge and building expertise of close-out netting in derivatives transactions in government and private sector and of the use of international standard contracts in local financial markets by market participants. If requested by a DMC, the TA will support reforms to improve the legal and regulatory basis for close-out netting which is fundamental for the development of well-functioning derivatives markets. The TA also supports Operational Priority 6: Strengthening Governance and Institutional Capacity by strengthening the quality and capacity of public institutions to undertake policy reforms and promote private sector development, and Operational Priority 7: Fostering Regional Cooperation and Integration by strengthening regional financial sector regulations and promoting measures to harmonize cross-border transactions. It also aligns with international commitments and principles for financial stability. | ||||
| Project Rationale and Linkage to Country/Regional Strategy | A well-functioning derivatives market reduces credit risk, enhances liquidity in local capital markets, increases access to international market participants and provides risk management for financial intermediaries and end users of financial markets. As an important mechanism of credit risk reduction, close-out netting underpins the development of well-functioning derivatives markets. It has the economic advantage of contributing to greater liquidity in financial transactions, as less capital is required to be held against counterparty exposures. Market participants in "clean netting" jurisdictions enjoy greater access to international derivatives markets. Consequently, market participants within a "clean netting" jurisdiction have lower cost of funding relative to those in non-netting jurisdictions. The use of international standard contracts which confirms the netting of outstanding transactions and the financial collateral arrangements which support their operations, builds on the legal pillar of close-out netting and further contributes to greater liquidity in financial transactions within and across borders. | ||||
| Impact | Impact(s) the TA is aligned with increased access to international capital markets and domestic resource mobilization. |
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| Project Outcome | |
|---|---|
| Description of Outcome | Legal and regulatory environment for close-out netting in selected DMCs improved. |
| Progress Toward Outcome | |
| Implementation Progress | |
| Description of Project Outputs | Awareness-raising and capacity building on close-out netting in derivatives transactions delivered. Capacity building on the use of international standard contracts in financial markets delivered. Legal and regulatory reform for close-out netting supported. |
| Status of Implementation Progress (Outputs, Activities, and Issues) | |
| Geographical Location | Indonesia - Nation-wide; Kazakhstan - Nation-wide; Sri Lanka - Nation-wide; Uzbekistan - Nation-wide |
| Summary of Environmental and Social Aspects | |
|---|---|
| Environmental Aspects | |
| Involuntary Resettlement | |
| Indigenous Peoples | |
| Stakeholder Communication, Participation, and Consultation | |
| During Project Design | |
| During Project Implementation | |
| Responsible ADB Officer | McBride, Nicholas |
| Responsible ADB Department | Office of the General Counsel |
| Responsible ADB Division | Office of the General Counsel |
| Executing Agencies |
Asian Development Bank |
| Timetable | |
|---|---|
| Concept Clearance | - |
| Fact Finding | - |
| MRM | - |
| Approval | 29 Dec 2020 |
| Last Review Mission | - |
| Last PDS Update | 03 Mar 2022 |
TA 6709-REG
| Milestones | |||||
|---|---|---|---|---|---|
| Approval | Signing Date | Effectivity Date | Closing | ||
| Original | Revised | Actual | |||
| 29 Dec 2020 | - | 29 Dec 2020 | 31 Dec 2022 | - | 21 Mar 2023 |
| Financing Plan/TA Utilization | Cumulative Disbursements | |||||||
|---|---|---|---|---|---|---|---|---|
| ADB | Cofinancing | Counterpart | Total | Date | Amount | |||
| Gov | Beneficiaries | Project Sponsor | Others | |||||
| 225,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 225,000.00 | 01 Apr 2023 | 190.00 |
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| Title | Document Type | Document Date |
|---|---|---|
| TA 6709-REG Enabling Close-Out Netting in Derivatives Transactions and Use of International Standard Contracts in Financial Markets: Technical Assistance Cancellation | Cancellation Notices | Mar 2023 |
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