ASTANA, Kazakhstan, December 7. The European Bank for Reconstruction and Development (EBRD) is further developing the financial markets in Kazakhstan by introducing a new local currency interest rate swap derivative – an Overnight Indexed Swap (OIS) in which the overnight rate is exchanged for a fixed interest rate, Trend reports.
As the bank noted, the first one-year OIS transaction based on the Tenge Overnight Index Average was concluded with one of the country's largest lenders - Bank CenterCredit (BCC).
As the EBRD explains, the OIS market will allow banks and investors to better manage their interest rate risk, thus making the financial system more stable and financial markets in Kazakhstan more attractive.
"The EBRD and Kazakhstan are making significant progress in the development of financial markets. This transaction reconfirms the role of TONIA as the interest rate benchmark in the country, stimulates local currency lending and encourages more TONIA-linked swaps," said the EBRD's Treasurer Axel van Nederveen.
The EBRD believes the new derivative instrument fills an important gap in the capital markets and is keen to participate in the development of this one, not only as part of its commitment to local currency financial markets, but also as an active participant.
In line with market practices for indexing transactions to similar overnight risk-free-rates in other currencies, TONIA is compounded daily, and the compounded rate is then calculated using TONIA Compounded Index (TCI) at the end of each interest period. Using TCI simplifies calculations and reduces the risk of operational error.
The European Bank for Reconstruction and Development's (EBRD) current project portfolio in Kazakhstan reached 2.8 billion euros as of October 31, 2023, based on the implementation of 114 active portfolio projects.
Investments in sustainable infrastructure projects account for 70 percent of the overall portfolio (1.97 billion euros). The industry, commerce, and agribusiness sectors also benefit significantly from EBRD's investments, with projects worth approximately 689 million euros making up around 24 percent of the portfolio.
Furthermore, the EBRD's support for the financial sector of Kazakhstan, with investments in financial institutions comprising 5 percent of the portfolio, amounts to 148 million euros.
With more than 10 billion euros invested in the country to date through 313 projects, Kazakhstan is the EBRD’s largest and longest-running banking operation in Central Asia.