30572 - DB FX Facility

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Summary of Proposed Investment

Project Number

30572

Company Name

LCRS-DB

Date SPI Disclosed

May 27, 2011

Country

World Region

Industry

Financial Markets

Projected Board Date

Jun 30, 2011

Status

Pending Signing

Sector

Capital Markets Financing Company (Including Investment Banking)

Date Revised SPI Disclosed

Oct 28, 2011

Department

Products Clients and Innovation

Environmental Category

Previous Events

Approved : Jul 19, 2011

Project Description

In the proposed project, IFC will establish a risk-sharing facility of up to $100 million with Deutsche Bank, AG (“DB”) to share the risk of credit losses resulting from certain corporate and financial institution credit risk events in emerging markets. The facility will cover a pool of eligible transactions which include cross currency swaps and forwards and local currency interest rate swaps entered into by DB originated during a term of two years (the “Facility”).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management	100.0
Guarantee
Loan
Equity

Development Impact

The proposed Facility is expected to have a number of development benefits and should help IFC meet its Institutional Development Goals ("IDG"). First, it will increase the depth of local and cross-currency hedging products that are available to clients in emerging markets. Second, it will promote hedging transactions in markets where there are significant barriers to entry for many companies and financial institutions, by seeking to widen the circle of counterparts to include second-tier credits. Third, by improving access for emerging market clients to currency risk hedging products, it will facilitate financial risk management and planning, specifically in sectors that are key for the development of local economies such as microfinance, medium-sized enterprises operating in the manufacturing and agribusiness sectors, pension funds, and low-income housing. Broadening access to cross-currency hedging tools will enable clients in these key industries to better manage foreign exchange risk and strengthen their balance sheets and, through increased access to finance and more efficient use of capital, expand their businesses. Fourth, since only swap transactions with at least one local currency leg will be eligible for inclusion, the Facility will contribute especially to the development of local derivatives markets.

In many emerging markets, cross-currency swaps and forwards, as well as local currency interest rate swaps, are not liquid beyond short tenors and/or are available only to top credits, creating an obstacle for emerging market clients to manage their foreign exchange risk effectively. By providing coverage for a portion of the credit risk related to eligible counterparts, IFC will support DB to undertake longer dated cross-currency swaps and forwards, and also local currency interest rate swaps, to counterparties operating in key sectors of local economies.

This proposed project has been classified as a Category FI project according to IFC''s Environmental and Social Review Procedure. Eligibility criteria for counterparties to be included in the facility shall include the IFC Exclusion List and other requirements as established by IFC and agreed to by DB. DB will implement procedures to screen counterparties in the Facility for the eligibility requirements and will identify person(s) to manage and implement the necessary procedures. DBAG’s treatment of its employees will demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions. In addition, DB will submit a periodic report of exposures included in the facility to IFC as per a mutually agreed upon format to be provided by IFC.

Contacts

For Inquiries About the Project, Contact

Mr. Jeffrey Fishman Deutsche Bank, Structured Solutions Group 60 Wall Street New York, NY, USA 10005
Telephone +1(212) 250-8970 Fax +1(212)553-2393 E-mail: Jeffrey.Fishman@db.com

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This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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