Euroclear Bank completes first tri-party repo trade for Korean government debt; Euro-Asia link growing

Euroclear Bank, the depositary arm of the Euroclear group, the trade settlement giant, has processed the first ever cross-border tri-party repo transaction using Korean government debt as collateral for DekaBank and Morgan Stanley.

The breakthrough comes a month after Euroclear Bank linked with Korea Securities Depository (KSD) to let market participants to settle cross-border transactions involving Korean government bonds and hold them in custody with Euroclear Bank to use as collateral.

It also furthers a wider international trend for 'secured' short-term cash financing, away from the relatively unsecured money market. For example, the latest survey from the International Capital Markets Association (ICMA) found that outstanding repo transactions in Europe rose 5.1% this year up to September.

Asian and European clients use Euroclear Bank's tri-party services to settle repos and other financing transactions using international and domestic securities from more than 40 markets, including 10 in the Asia-Pacific region.

Euroclear Bank clients have increased their use of Japanese government bonds (JGBs) as collateral for financing purposes since services for JGBs became available at Euroclear Bank in March 2007, according to the company.

Frédéric Hannequart, chairman of Euroclear Bank, said: "There is a growing interest in Euroclear Bank's transcontinental financing capabilities as a triparty agent. We are assisting more and more European firms to finance repos involving European and major Asia-Pacific currencies, with local Asian counterparties and securities as collateral.”

Grant Saunders, head of equity financing & tri-party financing at DekaBank, said that “as commercially sourced liquidity can be hard to attain in certain markets, we welcome Euroclear Bank's efforts to deepen securities collateral pools by making more types of securities, such as Korean government bonds, available for financing purposes”.