The 7th edition of the LCY Lab was hosted by KfW in Frankfurt, Germany on November 9th, 2017. Please find the program below. All presentations are attached (please scroll down). The presentations are protected with a password. Please contact us if you do not know the password.
The program:
| Introduction | Build-up of the day | By Per van Swaay (TCX) |
| Outlook Frontier Markets | Thomas Duve will share the ambition of KfW on its Marshall Plan with Africa, while Bert van Lier will provide a more general market update. | By Dr. Thomas Duve (KfW) and B. van Lier (TCX |
| Presentation: “Results of the local currency study” | ||
| Local currency: Reality vs. potential | Following TCX’s recently conducted survey, Jonas Enrico Luini will look at the existing gap between shareholders’ local currency debt portfolio (mostly concentrated in financial institutions) and the USD portfolio in principle suitable for local currency. Furthermore, we will explore whether there is a correlation between financial returns and share of local currency debt portfolio. Finally, the focus will be on unhedged FX exposure and related strategy implemented by fund managers and DFIs. | By J. Luini (TCX) |
| Explaining the gap: borrower and lender considerations and the role of credit process | The concept of targetable LCY market will be highlighted (and its flipside: the misinformation around missed LCY opportunities). Anecdotally we will address borrower and lender considerations; this will include angles & input from behavioral finance (covered by Thomas van Galen). Finally we will consider how FX proof the credit process is. |
By P. van Swaay (TCX) and T. Galen (Cardano Risk Management, PhD in Behavioral Finance) |
| Why is LCY lending considered too expensive? | Othman Boukrami will discuss the potential reasons why LCY is considered too expensive. The structure of the presentation and arguments presented will be qualitative including: a. Is TCX base rate too high? b. Are DFIs credit margin too high? c. Credit risk assessment and what is DFIs additionality. d. Does the original sin still hold? Is there enough liquidity onshore? e. Are borrowers looking for long term liabilities or just cheap liquidity? |
By O. Boukrami (TCX) |
| Presentation: “De-dollarization” How supportive of these policies TCX’s product can be? Case study: Georgia and how the market adjusted to the dollarization measures”. | Jos will paint the big picture of dollarization across EM. a. What is dollarization? Different gradations & shapes b. Pro & cons of dollarization: what would be reasons to de-dollarize? The Deputy governor of the NBG, Mr Mestvirishvili, will discuss the journey that led the central bank to enforce de-dollarization measures. a. The problem b. The objective: FX reform/Capital Market/Transmission mechanisms c. The action plan of the NBG Hana will analyze the effectiveness of the reforms Jerome will conclude by commenting on the role of TCX as well as: a. the instruments available to support de-dollarization (onshore and offshore) b. run a gap analysis between the funding needs of the financial sector and what funding can be provided to support the market. |
By: H. Becickova (TCX), J. Kramer (TCX), A. Mestvirishvili (National Bank of Georgia) and J. Pirouz (TCX). |
| Panel discussion: what are the different alternatives to raise LCY liabilities | TCX is not the only LCY hedging source anymore. What are the different alternatives to raise LCY liabilities and what are the pros and cons of each solution. | Aude Pacatte (EBRD), Akua Opoku-Mensah (IFC), Pim Arends (FMO) and Diego Stapff (EFSE) will be explaining and debating each alternative. Othman Boukrami (TCX) will be moderating the debate. |