Exploring Crown Agents Bank’s role as an aggregator in the FX and payments landscape, Duarte Pedreira, head of international development organisations and trade finance, discusses operational advantages, trends in African debt management and liquidity shortages.


Q: Crown Agents Bank is a so-called aggregator. What does that mean and how does the operational experience differ from a single relationship model for clients?

Pedreira: We function as an aggregator, or as I often term it, an infrastructure provider for entities venturing into trading and payments within hard-to-reach market currencies. Our approach involves creating a network encompassing nearly 300 central and commercial banks across hard-to-reach markets. This network ensures a steady supply of local currency liquidity and payment services.

While others scaled down their correspondent networks, we took an alternative route, expanding ours to encompass over 100 currencies. Within the global south FX sector, an aggregator serves as a comprehensive solution for entities engaged in continuous cross-border transactions across diverse geographies. These entities encompass banks, non-bank financial institutions (NBFIs), governments, multilateral development organisations, NGOs and more.

Utilising an aggregator presents notable advantages. It translates into substantial cost and effort savings, as you circumvent the need to manage your own network of liquidity and payment providers in each jurisdiction.


Q: Where is your industry heading? What is the direction of travel?

Pedreira: The blue sky thinking for the FX and payments ecosystem is to achieve full integration from the ERP of the funds remitter, all the way to a beneficiary receiving her funds in a pre-paid card, mobile wallet or bank account, including direct connections into the aggregators and their liquidity providers. The goal now extends beyond merely offering liquidity for hard-to-reach market currencies; it’s about ensuring delivery to the final step – the intended recipient’s wallet, whether physical or digital. Aggregators are strategically positioning themselves to address these client demands, transitioning toward a more payments-oriented focus, given the growing assumption of access to local currency liquidity.

Navigating this landscape hinges on intelligent partnerships. Aggregators are actively seeking collaborations with top-tier payment providers, and ultimately, aim to furnish their clientele with a menu of payment corridors, allowing them to select solutions that align precisely with their needs.


Q: Your role in the market comes with some advantages, such as the ability to track early indicators of hard currency shortages. How does this manifest?

Pedreira: Our business model centres on clients seeking local hard-to-reach market currencies. In 2022 alone, our trading surpassed US$17bn for these currencies, serving clients like development organisations, governments and banks. By carrying substantial hard currency into hard-to-reach markets, we establish ourselves as a key barometer of hard currency demand. We gain insight into situations where countries face shortages, observing competitive bids from local banks. However, this process is nuanced. African currencies have seasonal peaks, potentially obscuring true shortages.


Q: Given Crown Agents Bank’s work with African central banks, are you seeing any new trends in the way African countries manage their foreign debt?

Pedreira: Certainly. Our business model holds the potential to revolutionise central bank reserve management by allowing central banks to use their own currency for sovereign debt payments. This trend embraces the natural netting mechanisms stemming from inflows of hard currency, driven by entities like banks, NBFIs and the development sector. These entities seek African currencies for practical purposes in hard-to-reach markets.

Central banks require hard currency reserves, especially at the sovereign level. The logical solution is to align these needs, creating mutually beneficial outcomes. Foreign entities access local African currencies they need, while central banks act as suppliers from their local currency reserves. Central banks receive incoming hard currency against the local currency they provide. This incremental hard currency is then used to service foreign debt repayments in hard currency. This approach avoids hidden debts or gimmicks. It’s about harmoniously pairing counterparts with complementary needs, facilitating a seamless exchange of value.


Q: Where do you see the most FX volatility in the continent at present? Where are the most visible liquidity shortages? And how is the development sector being affected?

Pedreira: 2022 was one of the most volatile years in recent history for the continent, and central banks have worked hard to regain control of their currencies in 2023. This has seen many currencies trade relatively calmly compared to last year in H1 2023.

The current calm could be short-lived as many of the structural US dollar shortage issues haven’t been addressed and we see many countries still struggling for US dollars, especially in the Sub-Sahara region.

Development organisations are sending hard currency into the region; however, the liquidity shortage becomes an issue if they try to get the money out.