GOVERNMENT says it is critical for financial players to be conversant with derivatives for the market to grow in the country.
Acting Permanent Secretary for Economic Management and Finance Edward Kapwepwe said knowledge of a derivative which is a financial instrument that derives its value from the value of underlying entities such as an asset, index or interest rate it has no intrinsic value in itself is important.
Mr Kapwepwe said, “Collaboration with financial institutions and market players in the development and integration of our financial markets is critical.”
Mr Kapwepwe said this when he officiated at a derivatives symposium hosted by Standard Chartered Bank Zambia for Ministry of Finance and Bank of Zambia officials in Lusaka last Friday.
The symposium focused on the, ‘key principles of derivatives and the documents that govern these structures. The symposium was presented in collaboration with a leading regulatory expert in derivatives from Reed Smith.
He said the knowledge from the symposium will assist financial players to better regulate and monitor derivatives, thus providing a conducive environment for the markets to thrive.
“It is, therefore, pleasing to note that banks are taking initiatives such as these, and I would like to commend the bank for this,” he said.
At the same occasion, Standard Chartered Bank Zambia acting managing director Kelvin Musana said the bank takes pride in being market leaders in spearheading market development in Zambia.
Mr Musana said the bank has a deep understanding of tools such as derivatives hence the need for both the clients and regulatory.
“As a leading local market player, the bank has been able to tap onto our international footprint to bring expertise into the Zambian market… we take risk management very seriously,” he said.
He said the bank has held similar symposiums in other African markets, including Ghana and Uganda in the last year.
The symposium covered, among others issues, the key principles of foreign exchange options, how derivatives work in practice and why they are used for risk management.
Derivative transactions include a variety of financial contracts, such as structured debt obligations and deposits, swaps, futures, options, caps, floors, collars and forwards.