TREASURY MANAGEMENT POLICY AND STRATEGY 2023/24
CONTENTS
1. INTRODUCTION
1.1. Background
1.2. Reporting Requirements
1.3. Treasury Management Strategy for 2023/24
1.4. Treasury Management Policy Statement
1.5. Current Portfolio Position
2.1. General Fund Borrowing Position and Strategy for 2023/24
2.2. Housing Revenue Account Borrowing Position and Strategy for 2023/24
2.3. Policy on Borrowing in Advance of Need
2.5. Interest Rate Risk & Continual Review
3. MINIMUM REVENUE PROVISION POLICY STATEMENT
4.1. Annual Investment Strategy for 2023/24
4.2. Investment Policy – Management of Risk
4.3. Sovereign Credit Ratings
4.5. Other Limits
4.6. Approved Methodology for adding & removing counterparties
4.7. Investment Risk Benchmarking
5. OTHER TREASURY MATTERS
5.1. Banking Services
5.2. Training
5.3. Policy on the use of External Service Providers
5.4. Lending to Third Parties
5.5. Updates to Accounting Requirements
5.6. Updates to Treasury and Prudential Codes
ANNEXES:
Annex A Counterparty List
Annex B Economic Overview & Prospect for Interest Rates
Annex C Prudential & Treasury Indicators
Annex D Scheme of Delegation
1 INTRODUCTION
1.1 Background
The council is required to set a balanced budget, which broadly means that cash raised and received during the year will meet cash expenditure. Part of the treasury management operation is to ensure that this cash flow is adequately planned, with cash being available when it is needed. Cash can often be set aside (e.g. reserves) or received ahead of when it is required, for example, government capital grant funding, and therefore cash balances are invested in counterparties or instruments commensurate with the council’s risk appetite, and always prioritising adequate liquidity before considering investment return.
The second main function of the treasury management service is the funding of the council’s capital plans. These capital plans provide a guide to the borrowing need of the council, essentially the longer-term cash flow planning, to ensure that the council can meet its capital spending obligations. This management of longer-term cash may involve arranging long or short-term loans or using longer-term cash flow surpluses. On occasion, when it is prudent and economic, any debt previously drawn down may be restructured to meet council risk or cost objectives.
The contribution that the treasury management function makes to the authority is critical, as the balance of debt and investment operations ensure liquidity and the ability to meet spending commitments as they fall due, either on day-to-day revenue spending or for larger capital projects. The treasury operations will see a balance of the interest costs of debt and the investment income arising from cash deposits affecting the available budget. Since cash balances generally result from holding reserves and balances, it is paramount to ensure adequate security of the sums invested, as a loss of principal will in effect result in a direct loss to the General Fund.
CIPFA defines treasury management as:
“The management of the local authority’s borrowing, investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.”
Whilst any commercial initiatives or loans to third parties will impact on the treasury function, these activities are generally classed as non-treasury activities (arising usually from capital expenditure) and are separate from the day-to-day treasury management activities.
1.2 Reporting Requirements
1.2.1 Capital Strategy
The CIPFA 2021 Prudential and Treasury Management Codes require all local authorities to prepare a capital strategy report, to provide the following:
· a high-level long-term overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services;
· an overview of how the associated risks are managed;
· the implications for future financial sustainability.
The aim of the strategy is to ensure that all the Authority’s elected members fully understand the overall long-term policy objectives and resulting Capital Strategy requirements, governance procedures and risk appetite.
This Capital Strategy is reported separately from the Treasury Management Strategy Statement with non-treasury investments being reported through the former. This ensures the separation of the core treasury function under security, liquidity and yield principles, and the policy-driven and commercial investments usually driven by expenditure on an asset.
1.2.2 Treasury Management reporting
The Council is currently required to receive and approve, as a minimum, three main treasury reports each year, which incorporate a variety of policies, estimates and actuals.
a. Prudential and treasury indicators, and treasury strategy (this report) - The first, and most important report, is forward looking and covers:
· the capital investment plans, (including prudential indicators);
· a Minimum Revenue Provision (MRP) policy, (how residual capital expenditure is charged to revenue over time);
· the Treasury Management Strategy, (how the investments and borrowings are to be organised), including treasury indicators; and
· an Annual Investment Strategy, (the parameters on how investments are to be managed).
b. A mid-year treasury management report – This is primarily a progress report and will update members on the capital position, amending prudential indicators as necessary, and whether any policies require revision. In addition, this Authority will receive quarterly update reports.
c. An annual treasury management report – This is a backward looking review document and provides details of a selection of actual prudential and treasury indicators and actual treasury operations compared to the estimates within the strategy.
This Council delegates responsibility for implementation and monitoring of treasury management to the Policy & Resources Committee (P&R) and responsibility for the execution and administration of treasury management decisions to the Section 151 Officer. P&R therefore receives the mid-year report in December and the annual report in July each year.
The above reports are required to be adequately scrutinised before being recommended to the Council. This role is undertaken by the Policy & Resources Committee.
Quarterly reports – In addition to the three major reports detailed above, from 2023/24 quarterly reporting is also required. However, these additional reports do not have to be reported to Full Council but do require to be adequately scrutinised. This role is undertaken by the Policy & Resources Committee and will be incorporated into TBM5 and TBM9 monitoring reports presented in October and February of each year, with the other quarters already being fulfilled by the mid-year and annual end of year reports.
1.3 Treasury Management Strategy for 2023/24
The strategy for 2023/24 covers two main areas:
1.3.1 Capital issues:
· the capital expenditure plans (section 2) and the associated prudential indicators (Annex C);
· the minimum revenue provision (MRP) policy (Section 3).
1.3.2 Treasury management issues:
· the current treasury position (section 1.5);
· treasury indicators which limit the treasury risk and activities of the council (Annex C);
· prospects for interest rates (Annex B);
· the borrowing strategy (section 2);
· policy on borrowing in advance of need (section 2.3);
· debt rescheduling (section 2.4);
· the investment strategy (section 4);
· creditworthiness policy (section 4.4); and
· the policy on the use of external service providers (section 5.3).
These elements cover the requirements of the Local Government Act 2003, the CIPFA Prudential Code, DLUHC MRP Guidance, the CIPFA Treasury Management Code and DLUHC Investment Guidance.
1.4 Treasury Management Policy Statement
The policies and objectives of the council’s treasury management activities are as follows:
i) This council defines its treasury management activities as:
‘The management of the authority’s investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks’.
ii) This council regards the successful identification, monitoring and control of risk to be the prime criteria by which the effectiveness of its treasury management activities will be measured. Accordingly, the analysis and reporting of treasury management activities will focus on their risk implications for the council, and any financial instruments entered into to manage these risks.
iii) This council acknowledges that effective treasury management will provide support towards the achievement of its business and service objectives. It is therefore committed to the principles of achieving value for money in treasury management, and to employing suitable comprehensive performance management techniques, within the context of effective risk management.
1.5 Current Treasury Portfolio Position
A summary of the council’s borrowing & investment portfolios as at 31 December 2022 and forecast at the end of the financial year is shown in Table 1 below:
|
Table 1 |
Actual at 31 December 2022 |
Forecast to 31 March 2023 |
|
|||||
|
|
£’000 |
% of portfolio |
Average Rate* |
£’000 |
% of portfolio |
Average Rate |
|
|
|
Treasury Investments |
||||||||
|
UK Banks |
96.500 |
43.3% |
3.13% |
72,500 |
40.0% |
3.33% |
|
|
|
Non-UK Banks |
55,000 |
24.7% |
2.54% |
40,000 |
22.0% |
2.94% |
|
|
|
Building Societies |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
|
Local Authorities |
29,000 |
13.0% |
1.69% |
29,000 |
16.0% |
1.69% |
|
|
|
Money Market Funds (Including VNAV) |
32,437 |
14.5% |
3.32% |
30,000
|
16.5% |
4.00% |
|
|
|
Royal London Funds** |
10,000 |
4.5% |
-7.55% |
10,000 |
5.5% |
-7.55% |
|
|
|
Total Investments |
222,937 |
100.0% |
2.32% |
181,500 |
100% |
2.49% |
|
|
|
Borrowing |
||||||||
|
PWLB loans |
349,266 |
88.6% |
2.90% |
349,266 |
88.6% |
2.90% |
|
|
|
Market loans |
45,000 |
11.4% |
4.45% |
45,000 |
11.4% |
4.45% |
|
|
|
Local Authorities |
0 |
0 |
0 |
0 |
0 |
0 |
|
|
|
Total external Borrowing |
394,265 |
100.0% |
3.07% |
394,265 |
100.0% |
3.07% |
|
|
*average rate is taken as a snapshot as at 31 December 2022
**The Royal London Funds show a negative return as a result in a decline in capital value because fixed income funds such as these reduce in value in a rising interest rate market. The council is still receiving an appropriate level of revenue income from these funds, and the decline in capital value is expected to be short term and therefore not expected to result in an actual capital loss.
2 BORROWING STRATEGY
The capital expenditure plans set out in the Capital Strategy provide details of the service activity of the Authority. The treasury management function ensures that the Authority’s cash is organised in accordance with the relevant professional codes, so that sufficient cash is available to meet this service activity and the Authority’s Capital Strategy. This will involve both the organisation of the cash flow and, where capital plans require, the organisation of appropriate borrowing facilities. The strategy covers the relevant treasury / prudential indicators, the current and projected debt positions, and the Annual Investment Strategy.
Any capital investment that is not funded from new and/or existing resources (e.g. capital grants, receipts from asset sales, revenue contributions or earmarked reserves) increases the council’s need to borrow, represented by the council’s Capital Financing Requirement (CFR). However, external borrowing does not have to take place immediately to finance its related capital expenditure: the council can utilise cash being held for other purposes (such as earmarked reserves and working capital balances) to temporarily defer the need for external borrowing. This is known as ‘internal borrowing’ or ‘under-borrowing’.
The council’s primary objective is to strike an appropriate balance between securing cost certainty and securing low interest rates.
The council operates a two-pool approach for borrowing following the HRA Self Financing regime introduced in March 2012.
2.1 Capital Prudential Indicators
Tables 2, 3 and 4 show the capital expenditure plans of the Authority, and the implications of these on the Capital Financing Requirement over the 3-year period to 2025/26. These indicators have been included in the Treasury Management Strategy for a number of years to demonstrate the affordability and sustainability of the Authority’s capital activity.
A further prudential indicator required by the 2021 code for 2023/24 is the Liability Benchmark. This benchmark measures the Authority’s external debt levels net of the external investments, with the inclusion of a liquidity buffer against the Authority’s CFR projection. This measure assumes that the authority will internally borrow almost all its available cash held in reserves and balances, with an allowance ensure it is able to meet is cash obligations.
There are four components to the Liability Benchmark: -
1. Existing loan debt outstanding: the Authority’s existing loans that are still outstanding in future years.
2. Loans CFR:this is calculated in accordance with the loans CFR definition in the Prudential Code and projected into the future based on approved prudential borrowing and planned MRP.
3. Net loans requirement: this will show the Authority’s gross loan debt less treasury management investments at the last financial year-end, projected into the future and based on its approved prudential borrowing, planned MRP and any other major cash flows forecast.
4. Liability benchmark (or gross loans requirement): this equals net loans requirement plus short-term liquidity allowance.
The Liability Benchmark has been produced for the General Fund and HRA separately, and are shown below in sections 2.2.2 & 2.3.2 with notes to explain each element and the Authority’s assumption and forward view.
2.2 General Fund Borrowing Position and Strategy
The General Fund has been carrying an internal borrowing position (i.e. where the General Fund borrows cash from its own reserves) for a number of years. In response to a combination of the prior expectation of increasing interest rate forecasts, the reduction of certain reserves and historically low PWLB borrowing rates, the General Fund entered into planned borrowing from the PWLB to reduce the internal borrowing position in preparation for it increasing again during the period where high interest rates are expected.
Table 2 below demonstrates that the General Fund has a borrowing need of £39m to support the 2022/23 capital programme. During the year £25m of external borrowing has been undertaken for the General Fund. This external borrowing funds the planned borrowing within the capital programme and maintains the expected General Fund internal borrowing position.
There isn’t expected to be any further external borrowing required in 2022/23.
2.2.1 General Fund Borrowing Strategy for 2023/24
The General Fund (GF) capital programme 2023/24 to 2025/26 forecasts a total of £270m capital investment, £134m of which will be met from existing or new resources, and £4m of which financing has not yet been identified. The increase in the GF borrowing need over this period is therefore £132m as shown in Table 2 below.
|
2022/23 Projected |
Table 2 – Borrowing Requirement |
2023/24 Estimate |
2024/25 Estimate |
2025/26 Estimate |
Total |
|
£m |
£m |
£m |
£m |
£m |
|
|
88 |
GF Capital Expenditure |
120 |
107 |
43 |
270 |
|
(49) |
Financed by: New & existing resources |
(64) |
(53) |
(17) |
(134) |
|
- |
Financing not yet identified |
- |
(2) |
(2) |
(4) |
|
39 |
GF Borrowing Need |
56 |
52 |
24 |
132 |
Of the £132m borrowing need shown, £48m is for projects that are awaiting approval or detailed analysis. Therefore, the timing of borrowing is uncertain, and borrowing decisions for these projects will form part of the viability and due diligence process.
For the remaining borrowing need, the strategy will initially focus on meeting this borrowing need from internal borrowing. i.e. avoiding external borrowing by utilising the council’s own surplus cash flows.
Officers continually review the level of internal borrowing that the General Fund is able to support in the context of prevailing and forecast interest rates, economic outlook and the expected movement in reserves. Modelling of the movement of reserves and the council’s capital expenditure plans demonstrates that the General Fund’s long-term reserves and balances can support a level of approximately £75m of internal borrowing in the medium term. This will mitigate the increase in the cost of borrowing and reduce counterparty risk within the council’s investment portfolio by reducing the portfolio size.
The internal borrowing position needs to be carefully and continually reviewed to avoid incurring higher borrowing costs in the future at a time when the authority may not be able to avoid new borrowing to finance capital expenditure or refinance maturing debt.
2.2.2 General Fund Liability benchmark
The Liability Benchmark graph for the General Fund is shown below:
1) External Debt – The maturity profile of the current portfolio of general fund external debt is shown by the bars. The debt has a fairly gradual maturity profile which means that there are no requirements to pay back large amounts of debt in any one year.
2) Loans CFR – This is the projections of the general fund’s underlying borrowing requirement (or CFR) based on the current capital plans, and is shown by the top, red line. The 2022/23 opening Loans CFR was £219m, and it is expected to peak at £322m in 2025/26. This only shows the Loans CFR projection based on the current capital programme of the council, therefore if ongoing borrowing is required beyond 2027/28 then the CFR would rise further and for longer.
3) Net Loans Requirement – The expected net treasury position is shown by the bottom blue line. This shows a projection of the loans requirements measured by opening external debt for 2022/23 less the opening external investments for 2022/23. The projections are then based on the expected borrowing within the capital programme and the expected movement in reserves and balances, and shows the borrowing requirement if the Council were to utilise all of its reserves and balances for internal borrowing. This shows that the general fund had more external investments than external debt as at 31/03/22. Based on the current forecast, the net loans requirement peaks in 2026/27, but never above the current level of external borrowing. This suggests that if reserves and balances are fully utilised for internal borrowing, the current external borrowing portfolio is sufficient to sustain the current capital plans.
4) Liability Benchmark – The liability benchmark shows the Net Loan Requirement, but with a buffer of £50m incorporated to ensure the general fund has sufficient cash to meet its cash obligations. This measure shows the level to which the council can internally borrow based on the projection of the capital programme, movement of reserves and allowing for a liquidity buffer. Where the liability benchmark rises above the current debt portfolio, this shows a need for external borrowing, and where the benchmark reduces back below the current portfolio, it shows that the council will be over-borrowed based on current plans.
This graph demonstrates that the general fund may not need to externally borrow until 2024/25, and that the external borrowing requirement will peak at £190m in 2026/27, before falling. The graph also shows that based on current plans, new borrowing will be required until 2029/30, so a shorter period than the Council historically borrows for.
Whilst the Liability Benchmark is a good indicator of the general fund’s direction of travel in terms of borrowing need, it assumes that capital borrowing stops after the current capital planning period and ignores future borrowing beyond the planning period. Therefore, it should not be used in isolation when making long term decisions, but as part of a range of factors.
2.3 Housing Revenue Account (HRA) Borrowing Position and Strategy
The Housing Revenue Account (HRA) carries a fully funded borrowing position (i.e. the HRA does not borrow from its own reserves, but instead undertakes borrowing for its entire borrowing requirement). Table 3 demonstrates that the HRA has a borrowing need of £39m to support the capital programme in 2022/23. A total of £25m of new borrowing has been undertaken during 2022/23, and £55m in 2021/22. This results in the HRA temporarily being over-borrowed, as borrowing in advance of need has occurred in order to take advantage of attractive interest rates in a rising interest rate environment.
2.3.1 HRA Borrowing Strategy for 2023/24
The HRA Capital Programme 2023/24 to 2025/26 forecasts a total £183m of capital investment over the next three years with £80m met from existing or new resources. The increase in the HRA’s borrowing need over this period is therefore £103m as shown in Table 3 below. It is expected that this borrowing need will be met from a combination of borrowing externally (some of which has already been undertaken in advance of need) and from the General Fund. The extent to which the HRA can borrow from the General Fund is dependent on the level of liquid resources the General Fund has available to lend to the HRA and additionally will depend on the view of interest rate prospects:
· If it is considered that there is a significant likelihood of reducing long term interest rates, long term borrowing should be postponed;
· If it is considered that there is a significant risk of sharply increasing long term interest rates, long term borrowing should be considered.
|
2022/23 Projected |
Table 3 – HRA Borrowing Requirement |
2023/24 Estimate |
2024/25 Estimate |
2025/26 Estimate |
Total |
|
£m |
£m |
£m |
£m |
£m |
|
|
81 |
HRA Capital Expenditure |
92 |
50 |
41 |
183 |
|
(42) |
Financed by: New & existing resources |
(33) |
(26) |
(21) |
(80) |
|
39 |
HRA Borrowing Need |
59 |
24 |
20 |
103 |
2.3.2 HRA Liability Benchmark
The Liability Benchmark graph for the HRA is shown below:
5) External Debt – The maturity profile of the current portfolio of HRA external debt is shown by the bars. The debt has a fairly gradual maturity profile which means that there are no requirements to pay back large amounts of debt in any one year.
6) Loans CFR – This is the projections of the HRA’s underlying borrowing requirement (or CFR) based on the current capital plans, and is shown by the top, red line. The 2022/23 opening Loans CFR was £170m, and it is expected to peak at £343m in 2027/28. This only shows the Loans CFR projection based on the current capital programme of the council, therefore if ongoing borrowing is required beyond 2027/28 then the CFR would rise further. The CFR is maintained at £343m as the HRA is not required to set aside MRP, and the current assumption is that the HRA will re-finance maturing debt. This strategy is subject to review, depending on the expectation of the long-term borrowing need in the HRA capital programme.
7) Net Loans Requirement – The expected net treasury position is shown by the bottom blue line. This shows a projection of the loans requirements measured by opening external debt for 2022/23 less the opening HRA reserves for 2022/23. The projections are then based on the expected borrowing within the capital programme and the expected movement in reserves and balances, and shows the borrowing requirement if the HRA were to utilise all of its reserves for internal borrowing. This line tracks very closely to the Loans CFR due to the borrowing requirement being proportionality high compared to the HRA reserves.
8) Liability Benchmark – The liability benchmark shows the Net Loan Requirement, but with a buffer of £5m incorporated to ensure the HRA has sufficient cash to meet its cash obligations. This measure shows the level to which the HRA can internally borrow based on the projection of the capital programme, movement of reserves and allowing for a liquidity buffer. The HRA liability benchmark demonstrates that the HRA needs to externally borrow for nearly all of it’s borrowing requirement, which is the current strategy.
The graph demonstrates that the HRA has an ongoing external borrowing requirement to the extent of its CFR.
2.4 Capital Financing Requirement
Table 4below shows the actual expected external debt compared to the capital financing requirement over the next 3 years for both the General Fund and the HRA. This demonstrates that the HRA CFR is expected to be fully funded to 2025/26, and the General Fund is expected to maintain an under-borrowed position:
|
2022/23 |
Table 4
|
2023/24 Estimate |
2024/25 Estimate |
2025/26 Estimate |
|
Estimate |
||||
|
£m |
£m |
£m |
£m |
|
|
General Fund |
||||
|
161 |
GF Debt at 1 April |
180 |
196 |
236 |
|
19 |
Expected change in Debt |
16 |
40 |
10 |
|
180 |
GF Debt at 31 March |
196 |
236 |
246 |
|
219 |
GF CFR* at 1 April |
236 |
273 |
312 |
|
39 |
Borrowing need (Table 2) |
56 |
52 |
24 |
|
(22) |
MRP |
(19) |
(13) |
(14) |
|
236 |
GF CFR* at 31 March |
273 |
312 |
322 |
|
56 |
Under / (Over) borrowing |
77 |
76 |
76 |
|
23.7% |
% Under borrowed |
28.2% |
24.3% |
23.6% |
|
Housing Revenue Account |
||||
|
195 |
HRA Debt at 1 April** |
214 |
268 |
292 |
|
19 |
Expected change in Debt |
54 |
24 |
20 |
|
214 |
HRA Debt at 31 March |
268 |
292 |
312 |
|
170 |
HRA CFR at 1 April |
209 |
268 |
292 |
|
39 |
Borrowing need (Table 3) |
59 |
24 |
20 |
|
0 |
MRP |
0 |
0 |
0 |
|
209 |
HRA CFR at 31 March |
268 |
292 |
312 |
|
(5) |
Under / (Over) borrowing |
- |
- |
- |
* GF CFR in Table 4 is the underlying need to borrow and excludes PFI and lease arrangements, which are included in the CFR figure in the Prudential Indicators in Annex C.
2.5 Policy on Borrowing in Advance of Need
The council will not borrow purely in order to profit from investment of sums borrowed in advance of need. Any decision to borrow in advance will be within approved Capital Financing Requirement estimates and will be considered carefully to ensure that value for money can be demonstrated and that the council can ensure the security of such funds. Risks associated with any borrowing in advance activity will be subject to prior appraisal and subsequent reporting.
2.6 Debt Rescheduling
Officers continue to regularly review opportunities for debt rescheduling but there has been a considerable widening of the difference between new borrowing and repayment rates, which has resulted in far fewer opportunities to realise any savings or benefits from rescheduling PWLB debt.
The reasons for any rescheduling to take place will include:
· the generation of cash savings and / or discounted cash flow savings;
· helping to fulfil long term treasury strategy aims;
· enhancing the balance of the portfolio (amending the maturity profile and/or the balance of volatility).
The strategy is to continue to seek opportunity to reduce the overall level of the council’s debt where prudent to do so, thus providing in future years cost reduction in terms of lower debt repayment costs, and potential for making savings by running down investment balances to repay debt prematurely as short term rates on investments are likely to be lower than rates paid on current debt. All rescheduling will be agreed by the S151 Officer.
2.7 Interest Rate Risk & Continual Review
The council’s total borrowing need of £235m is identified in Tables 2 & 4. This borrowing need, together with the debt at risk of maturity shown in Table 5, is the extent to which the council is subject to interest rate risk over the next three years.
|
Table 5 |
2023/24 |
2024/25 |
2025/26 |
|
£m |
£m |
£m |
|
|
Maturing Debt |
15 |
14 |
5 |
|
Debt Subject to early repayments options |
15 |
10 |
10 |
|
Total debt at risk of maturity |
30 |
24 |
15 |
Officers continue to review the need to borrow taking into consideration the potential increases in borrrowing costs, the need to finance new capital expenditure, the need to refinance maturing debt, and the cost of carry that might incur a revenue loss between borrowing costs and investment returns.
Against this background and the risks within the economic forecast, caution needs to be exercised. The S151 Chief Finance Officer will therefore continue to monitor interest rates in financial markets and adopt a proactive approach to changing circumstances as follows:
· if it was considered that there was a significant risk of a forthcoming sharp fall in long- and short-term rates (e.g. due to a marked increase in the risk of relapse into recession or increasing risk of deflation), then long term borrowings will be postponed and potential rescheduling from fixed rate funding into short term borrowing will be considered;
· if it was considered that there was a significant risk of a much sharper rise in long and short term rates than that currently forecast, for example, arising from an acceleration in the rate of increase in central rates in the USA and UK, an increase in world economic activity or a sudden increase in inflation risks, then the portfolio position will be re-appraised with the likely action that borrowing would be undertaken and fixed rate funding drawn on whilst interest rates are still lower than they are expected to be in the next few years.
3 MINIMUM REVENUE PROVISION POLICY STATEMENT
The council is required to pay off an element of the accumulated General Fund capital spend each year (the Capital Financing Requirement - CFR) through a revenue charge (the Minimum Revenue Provision - MRP). Department of Levelling Up, Housing and Communities (DLUHC) regulations require the full Council to approve an MRP Statement in advance of each year. A variety of options are available to councils, so long as the principle of any option selected ensures a prudent provision to redeem its debt liability over a period which is commensurate with that over which the capital expenditure is estimated to provide benefits (i.e. the estimated useful life of the asset being financed).
The Council is recommended to approve the following MRP Statement for 2023/24:
For all debt where the government has provided revenue support (supported capital expenditure), the MRP policy will be:
· Provision on a straight-line basis over 50 years.
For all debt where the government does not provide revenue support:
· Where the debt relates to an asset, the council will set aside a sum equivalent to repaying the debt over the life of the asset either in equal instalments or on an annuity basis over a maximum life of 50 years. The method to be adopted will be determined according to which is the most financially beneficial to the council over the life of the asset.
· Where the debt relates to expenditure which is subject to a capitalisation direction issued by the government, the council will set aside a sum equivalent to repaying the debt over a period consistent with the nature of the expenditure on an annuity basis.
· In the case of assets under construction, MRP will be delayed until the relevant asset becomes operational.
Where the debt relates to capital loans to a third party:
· The repayments of principal will be set aside as capital receipts to finance the initial capital advance in lieu of making a MRP.
· Where the debt relates to the i360 Limited, the council will set aside MRP on an annuity basis over the shorter of the remaining asset life or remaining loan period.
Where the debt relates to the Living Wage Joint Venture:
· Where the Living Wage Joint Venture develops housing but disposes of these assets on completion, the council will set aside the capital receipt at the point of transfer in lieu of making an MRP payment.
· Where the Living Wage Joint Venture develops or acquires housing and retains these assets and future rental streams, the council will set aside, in equal instalments, a sum which is equivalent to repaying the debt at the end of year 40 within the 60 year business plan. Set aside will commence, at the latest, in the year in which net surpluses are modelled for each individual tranche of borrowing.
For on-balance sheet PFI schemes and leases, the MRP policy will be:
· Asset Life Method (annuity method) - the MRP will be calculated according to the flow of benefits from the asset, and where the principal repayments increase over the life of the asset. Any related MRP will be equivalent to the “capital repayment element” of the annual charge payable.
There is the option to charge more than the prudential provision of MRP each year through a Voluntary Revenue Provision (VRP).
4 ANNUAL INVESTMENT STRATEGY
The DLUHC and CIPFA have extended the meaning of ‘investments’ to include both financial and non-financial investments. This report deals with financial investments. Non-financial investments are covered in the Capital Strategy (Appendix 2).
The council’s investment policy has regard to the following:
· DLUHC’s Guidance on Local Government Investments (the “Guidance”);
· CIPFA Treasury Management in Public Services Code of Practice and Cross Sectoral Guidance Notes 2021 (the “Code”);
· CIPFA Treasury Management Guidance Notes 2021.
The council’s investment priorities will be the security of capital first, portfolio liquidity second and then yield (return). The Authority will aim to achieve the optimum return (yield) on its investments commensurate with proper levels of security and liquidity and with regard to the Authority’s risk appetite.
4.1 Annual Investment Strategy for 2023/24
Investments will be made with reference to the core balance and cash flow requirements and the outlook for short-term interest rates (i.e. rates for investments up to 12 months).
While most cash balances are required in order to manage the ups and downs of cash flow, where cash sums can be identified that could be invested for longer periods, the value to be obtained from longer term investments will be carefully assessed.
· If it is predicted that Bank Rate is likely to rise significantly within the time horizon being considered, then consideration will be given to keeping most investments on short term or variable terms.
· Conversely, if it is predicted that Bank Rate is likely to fall within that time period, consideration will be given to locking in the higher rates currently obtainable, for longer periods.
It is currently expected that the Bank Rate will increase further, but there is the prospect for Bank Rate to peak in the first half of 2023, and possibly reducing in the latter part of 2023. Link Asset Service’s (LAS) Bank Rate forecasts for financial year ends (March) are:
|
2022/23 |
2023/24 |
2024/25 |
2025/26 |
|
|
Bank Rate |
4.25% |
4.00% |
3.00% |
2.50% |
Link Asset Service’s (LAS) view on the prospect for interest rates, including their forecast for short term investment rates is appended at Annex B.
The primary principle governing the council’s investment criteria is the security of its investments but return on investment is also important. After this main principle, the council will ensure that:
· It maintains a policy covering both the categories of investment types it will invest in and the criteria for choosing investment counterparties with adequate security, and monitoring their security;
· It has sufficient liquidity in its investments.
4.1.1 Approach for 2023/24
Investment balances increased significantly between 2019/20 and 2021/22 due to a combination of an increase in PWLB borrowing, the short-term retention of certain COVID business grants received from the government, and an increase in cash balances managed on behalf of other organisations. This increase led to a change in the investment strategy monetary limits in 2022/23 to allow the strategy to cope adequately.
Investment balances have reduced, as expected, during 2022/23, as a result of some of the increases in cash being of a temporary nature.
The environment for investment has been more attractive during 2022/23 as a result of sharp increases in the Bank of England Base Rate as a reaction to inflationary pressures. The investments on returns have gradually been increasing over the year as maturing investments are rolled into new investments that reflect the increases in investment rates. The council’s treasury advisors have provided their forecast for investment rates in Annex B. Investment rates are expected to rise further into 2023/24, before falling again from 2024/25.
In February 2021, £10.0m was invested across two short term bond funds managed by Royal London Asset Management. There has been a fall in the capital value during 2022/23 as a result to the increase in the bank rate. There is no impact on the council’s income from these funds, and the current statutory override means that there is no impact on the council’s budget as a result of this change in value. The investment time horizon is expected to be at least 3 years, and therefore we are expecting the capital value to recover before divesting from the funds.
4.1.2 Changes from 2022/23 Strategy
There are no changes proposed to the 2022/23 Annual Investment Strategy.
4.2 Investment Policy – Management of risk
The guidance from DLUHC and CIPFA outlined in 4.0 places a high priority on the management of risk. The Council has a prudent approach to managing risk and defines it’s risk appetite by the following means:
i) Minimum acceptable credit criteria are applied in order to generate a list of high creditworthy counterparties. This also enables diversification and thus avoids a concentration of risk. The key ratings used to monitor counterparties are the short term and long-term ratings.
ii) Other information: ratings will not be the sole determinant of the quality of an institution; it is important to continually assess and monitor the financial sector on both a micro and macro basis and in relation to the economic and political environments in which institutions operate. The assessment will also take account of information that reflects the opinion of the markets. To achieve this consideration the council will engage with its advisors to monitor market pricing such as “credit default swaps” (CDS) and overlay that information on credit ratings.
iii) Other information sources used will include the financial press, share prices and other such information pertaining to the banking sector in order to establish the most robust scrutiny process on the suitability of potential investment counterparties.
iv) Where there is a significant or sudden deterioration in one or more indicators (such as CDS prices), officers will undertake a review and, where necessary take action. This action may take the form of temporary suspension of a counterparty from the council’s approved lending list, or a restriction of the maximum period and investment limits.
v) This authority has defined the list of types of investment instruments that the treasury management team are authorised to use.
a. Specified investments are those with a high level of credit quality and subject to a maturity limit of one year. The limits and permitted instruments for specified investments are listed within Table 6.
b. Non-specified investments are those with less high credit quality, may be for periods in excess of one year, and/or are more complex instruments which require greater consideration by members and officers before being authorised for use. The limits and permitted instruments for non-specified investments are listed within Table 7.
vi) Lending limits (amounts and maturity) for each counterparty will be set through applying the credit criteria matrix (within Table 7).
vii) This authority will set limits for the amount of its investments:
a. which are invested for longer than 365 days, detailed in the Treasury Indicators in Annex C;
b. which are invested in any one sector (paragraph 4.5);
c. which are invested in any one counterparty within its relevant sector (paragraph 4.5).
viii) Investments in Non-UK Banks will only be placed with counterparties from countries with a specified minimum sovereign rating of AA (paragraph 4.3).
ix) Investments in UK banks will only be placed with counterparties with a minimum credit rating of BBB.
x) This authority has engaged external consultants, (see paragraph 5.3), to provide expert advice on how to optimise an appropriate balance of security, liquidity and yield, given the risk appetite of this authority in the context of the expected level of cash balances and need for liquidity throughout the year.
xi) All investments will be denominated in sterling.
xii) As a result of the change in accounting standards under IFRS 9, this Authority will consider the implications of investment instruments which could result in an adverse movement in the value of the amount invested and resultant charges at the end of the year to the General Fund. (In November 2018, the MHCLG, concluded a consultation for a temporary override to allow English local authorities time to adjust their portfolio of all pooled investments by announcing a statutory override to delay implementation of IFRS 9 for five years ending 31.3.2023. The government has extended the implementation of IFRS9 until 31.03.2025.
xiii) The application of a risk benchmark (paragraph 4.7) to monitor the expected potential loss within the investment portfolio on an ongoing basis.
However, this authority will also pursue value for money in treasury management and will monitor the yield from investment income against appropriate benchmarks for investment performance (see paragraph 4.8). Regular monitoring of investment performance will be carried out during the year.
4.3 Sovereign Credit Ratings
For 2022/23 it is recommended to maintain the policy of lending to sovereign nations and their banks which hold at least an AA- credit rating. The list of countries that qualify using this credit criteria (as at the date of this report) are shown below:
AAA Australia, Denmark, Germany, Netherlands, Singapore, Sweden & Switzerland
AA+ Finland, Canada & United States,
AA France & United Arab Emirates
4.4 Creditworthiness Policy
Each counterparty included on the council’s approved lending list must meet the criteria set out below. Without the prior approval of the Council, no investment will be made in an instrument that falls outside the list below.
Table 6 below summarises the types of specified investment counterparties available to the council, and the maximum amount and maturity periods placed on each of these. A full list of the council’s counterparties and the current limits for 2023/24 are appended at Annex A.
When assessing credit ratings to ascertain limits for each counterparty, the lowest short- and long-term ratings from each of the three ratings agencies is applied. For simplicity, the ratings for Standard & Poor’s are used in the tables below.
4.4.1 Criteria for Specified Investments
All specified investments will be sterling denominated, with maturities up to a maximum of 1 year, meeting the minimum ‘high’ rating criteria where applicable:
|
Country/ Domicile |
Minimum Capital Require-ments |
Min. Credit Criteria (L/term / S/term) |
Max Amount |
Max. maturity period |
|
|
Debt Management and Deposit Facilities (DMADF) |
UK |
N/A |
N/A |
unlimited |
6 months |
|
UK Local Authorities |
UK |
N/A |
UK Sovereign Rating |
£20m per LA |
12 months |
|
UK Banks – part nationalised* |
UK |
UK government must own majority shareholding |
N/A |
£30m |
12 months |
|
UK Banks & credit rated Building Societies |
UK |
Must meet minimum credit criteria |
AA- / A-1+ |
£30m |
12 months |
|
A / A-1 |
£20m |
12 months |
|||
|
BBB / A-2 |
£15m |
6 months |
|||
|
Banks – Non-UK |
Those with sovereign rating of at least AA* |
Must meet minimum credit criteria |
AA- / A-1+
|
£30m
|
12 months
|
|
Non-rated Building Societies |
UK |
Must have an asset base of at least £5bn at the time of investment |
N/A |
£5m |
6 months |
|
Money Market Funds (CNAV and LVNAV) |
UK / Ireland / EU domiciled |
Must meet minimum credit criteria |
AAA |
£20m per fund |
Liquid |
|
Ultra Short Dated Bond Funds |
UK / Ireland / EU domiciled |
Must meet minimum credit criteria |
AA |
£20m per fund |
Liquid |
*See Paragraph 4.3 for full list of countries that meet these criteria
4.4.2 Lending to the council’s operational banking service provider
An additional operating limit of £2m and an additional investment limit of £5m will be provided for the council’s provider of transactional banking services (currently Lloyds Bank plc). It is unavoidable that the £2m operational limit will be breached from time to time however, officers will endeavour to keep this to an absolute minimum.
4.4.3 Part-Nationalised Banks
The council can lend up to £30m for up to 12 months to any bank in which the UK Government holds a majority shareholding regardless of the credit rating due to the implied government support of those entities. The Royal Bank of Scotland PLC & National Westminster Bank PLC are the two entities currently treated as part nationalised.
4.4.4 Non-Specified investments
These are any other types of investment that are not defined as specified.
|
Instrument Type |
Minimum credit criteria (L/term / S/term) |
Max. Amount 2021/22 |
Proposed Max. Amount 2022/23 |
Period |
|
|
UK Local Authorities |
N/A |
N/A |
£10m per LA |
£20m per LA |
5 years |
|
UK Banks & Non UK Banks
|
Fixed Deposits |
AA+ / A-1+ |
£25m |
£30m |
3 years |
|
AA- / A-1+ |
£25m |
£30m |
2 years |
||
|
Negotiable Instruments |
AA- / A-1+ |
£25m |
£30m |
5 years |
|
|
Short Dated Bond Funds |
UK/Ireland/EU domiciled |
Short Dated bond funds are not rated. A selection process will evaluate relative risks & returns. Security of the council’s money and fund volatility will be key measures of suitability |
£15m per fund |
£15m per fund |
Liquid |
A full list of counterparties that meet the council’s criteria for both specified and non-specified investments are listed in Annex A.
4.5 Other Limits
In order to mitigate concentration risk, there are a number of other limits imposed within the investment strategy. Table 8 sets out the maximum permitted investment for each sector at the time of investment:
|
Table 8 – Other Limits |
|
|
Sector |
Max total of portfolio |
|
Banking sector |
100% |
|
Building Society Sector |
75% |
|
Local Authority Sector |
100% |
|
Money Market Funds (MMF) |
100% |
|
Short Dated & Ultra Short Dated Bond Funds |
50% |
|
Debt Management Account Deposit Facility (DMADF) |
100% |
In addition to these limits:
· no more than 25% of the portfolio can be invested for more than 1 year; and
· with the exception of MMF & the DMADF, no one counterparty may have more than 25% of the relevant sector maximum at the time the investment is made.
4.6 Approved Methodology for adding and removing counterparties
A counterparty shall be removed from the council’s list where a change in their credit rating results in a failure to meet the criteria set out above.
A new counterparty may only be added to the list with the written prior approval of the Chief Finance Officer and only where the counterparty meets the minimum criteria set out above.
A counterparty’s exposure limit will be reviewed (and changed where necessary) following notification of a change in that counterparty’s credit rating or a view expressed by the credit rating agency warrants a change.
A counterparty’s exposure limit will also be reviewed where information contained in the financial press or other similar publications indicates a possible worsening in credit worth of a counterparty. The review may lead to the suspension of any counterparty where it is considered appropriate to do so by the Chief Finance Officer.
4.7 Investment Risk Benchmarking
This benchmark is a simple target (not limit) to measure investment risk and so may be breached from time to time, depending on movements in interest rates and counterparty criteria. The purpose of the benchmark is that the in-house treasury team can monitor the current and trend position and amend the operational strategy depending on any changes. Any breach of the benchmarks will be reported with supporting reasons in the mid-year or end of year reviews.
This matrix will only cover internally managed investments, excluding externally managed cash that has been subject to an individual selection process. It also excludes funds lend to other Local Authorities, consistent with the CIPFA Accounting Code.
For any investment where there is a direct and legal offset against an existing financial liability, the investment will be assumed to have a benchmark risk of 0.00%.
4.8 Investment Performance Benchmarking
5 OTHER TREASURY MATTERS
5.1 Banking Services
Lloyds Bank plc currently provides banking services for the council.
5.2 Training
The scale and nature of this will depend on the size and complexity of the organisation’s treasury management needs. Organisations should consider how to assess whether treasury management staff and board/ council members have the required knowledge and skills to undertake their roles and whether they have been able to maintain those skills and keep them up to date.
As a minimum, authorities should carry out the following to monitor and review knowledge and skills:
· Record attendance at training and ensure action is taken where poor attendance is identified.
· Prepare tailored learning plans for treasury management officers and board/council members.
· Require treasury management officers and board/council members to undertake self-assessment against the required competencies (as set out in the schedule that may be adopted by the organisation).
· Have regular communication with officers and board/council members, encouraging them to highlight training needs on an ongoing basis.”
In further support of the revised training requirements, CIPFA’s Better Governance Forum and Treasury Management Network have produced a ‘self-assessment by members responsible for the scrutiny of treasury management’, which is available from the CIPFA website to download.
Training was last provided for members of the Audit & Standards Committee and Policy & Resources Committee on 4 October 2021 and further training will be arranged as part of the member induction process during 2023.
The training needs of treasury management officers are periodically reviewed.
A formal record of the training received by officers central to the Treasury function and members who are responsible for decision making and scrutiny of the Treasury function will be maintained by the Principal Accountant (Treasury & Taxation).
5.3 Policy on the use of External Service Providers
The council uses Link Asset Services as its external treasury management advisors.
The council recognises that responsibility for treasury management decisions remains with the council at all times and will ensure that undue reliance is not placed upon our external service providers. It also recognises that there is value in employing external providers of treasury management services in order to acquire access to specialist skills and resources. The council will ensure that the terms of their appointment and the methods by which their value will be assessed are properly agreed and documented, and subject to regular review.
5.4 Lending to Third Parties
The council has the power to lend monies to third parties subject to a number of criteria. These are not treasury type investments, rather they are policy investments. Any activity will only take place after relevant due diligence has been undertaken, as described in the Capital Strategy (Appendix 2 to the budget report).
5.5 Updates to the Codes of Practice 2021
CIPFA published the revised Treasury and Prudential codes in 2021. Full adoption of the new Codes is incorporated within this strategy. The main changes to the codes are as follows:
· Adoption of a new liability benchmark treasury indicator to support the financing risk management of the capital financing requirement. This is included in Section 2.2.2 & 2.3.2 of this Appendix.
· Amendment to the knowledge and skills register for officers and members involved in the Treasury management function as set out in section 5.2 of this appendix.
· Quarterly reporting to members of performance against forward looking indicators. As outlined in 1.2.2 of this appendix, this will be built into the Target Budget Monitoring process in those quarters where members aren’t already receiving a report.
· ESG issues to be addressed within the authority’s treasury management policies and practices (TMP1). This isn’t a change in the council’s investment strategy, but how ESG is incorporated into the monitoring of counterparties’ credit standing. The Council’s Treasury Management Practices (TMPs) are in the process of being updated for the new financial year to include this requirement. These will be reviewed and implemented by the Chief Finance Officer.
· An update to ensure that authorities are more transparent in their service and commercial investments. This includes a requirement that the Council acknowledges that it will not borrow to invest in the primary purpose for commercial return. These changes are reflected in the Capital Strategy.
5.6 Updates to Accounting Requirements
IFRS 9 – local authority override – English local authorities
The MHCLG (DLUHC) enacted a statutory over-ride from 1.4.18 for a five-year period following the introduction of IFRS 9 in respect of the requirement for any unrealised capital gains or losses on marketable pooled funds to be chargeable in year. his has the effect of allowing any unrealised capital gains or losses arising from qualifying investments to be held on the balance sheet to allow authorities to initiate an orderly withdrawal of funds if required.
Following recent consultation, DLUHC have extended the override for a further two years until 31 March 2025. The full government response is due in early 2023.
IFRS 16 – Leasing
The CIPFA LAASAC Local Authority Accounting Code Board has deferred implementation of IFRS16 until 1.4.24, the 2024/25 financial year. Once implemented, this has the following impact to the Treasury Management Strategy:
· The MRP Policy sets out how MRP will be applied for leases bought onto the balance sheet;
· The Council’s Capital Financing Requirement authorised limit and operational boundary expectations for 2024/25 onwards have been increased to reflect the estimated effect of this change.
ANNEX A - Approved List of Counterparties 2023/24
|
Counterparty |
Specified /Non-specified |
Short-term |
Long-term |
Lending Limit |
Fixed deposit duration limit (months) |
||||||
|
F=Fitch M=Moody’s SP=Standard & Poor’s |
|||||||||||
|
F |
M |
SP |
F |
M |
SP |
||||||
|
(1) UK Banks |
|||||||||||
|
Lloyds Banking Group: |
|||||||||||
|
Bank of Scotland PLC (RFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A+ |
£25m |
12 |
||
|
Lloyds Bank PLC (RFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A+ |
£25m |
12 |
||
|
Lloyds Bank Corporate Markets PLC (NRFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£25m |
12 |
||
|
Total Max. exposure to Lloyds Banking Group |
£25m |
12 |
|||||||||
|
Barclays Banking Group: |
|||||||||||
|
Barclays Bank PLC (NRFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£20m |
12 |
||
|
Barclays Bank UK PLC (RFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£20m |
12 |
||
|
Total Max. exposure to Barclays Banking Group** |
£20m |
12 |
|||||||||
|
HSBC Group: |
|||||||||||
|
HSBC Bank PLC (NRFB) |
Specified |
F1+ |
P-1 |
A-1 |
AA- |
A1 |
A+ |
£20m |
12 |
||
|
HSBC UK Bank PLC (RFB) |
Specified |
F1+ |
P-1 |
A-1 |
AA- |
A1 |
A+ |
£20m |
12 |
||
|
Total Max. exposure to HSBC Group** |
£20m |
12 |
|||||||||
|
RBS/Natwest Group: |
|||||||||||
|
Natwest Markets PLC (NRFB) |
Specified |
F1 |
P-1 |
A-2 |
A+ |
A1 |
A- |
£15m |
6 |
||
|
National Westminster Bank PLC (RFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£30m |
12 |
||
|
The Royal Bank of Scotland PLC (RFB) |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£30m |
12 |
||
|
Total Max. exposure to RBS/Natwest Group** |
£30m |
12 |
|||||||||
|
Close Brothers Ltd |
Specified |
F2 |
P-1 |
|
A- |
Aa3 |
|
£15m |
6 |
||
|
Clydesdale Bank PLC |
Specified |
F2 |
P-2 |
A-2 |
A- |
A3 |
A- |
£15m |
6 |
||
|
Goldman Sachs International Bank |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A+ |
£20m |
12 |
||
|
Handelsbanken PLC |
Both |
F1+ |
|
A-1+ |
AA |
|
AA- |
£30m |
24 |
||
|
Santander UK PLC |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£20m |
12 |
||
|
Standard Chartered Bank |
Specified |
F1 |
P-1 |
A-1 |
A+ |
A1 |
A |
£20m |
12 |
||
|
SMBC Bank International Plc |
Specified |
F1 |
P-1 |
A-1 |
A- |
A1 |
A |
£15m |
6 |
||
|
(2) Building Societies+ |
|||||||||||
|
Coventry (2) |
Specified |
F1 |
P-1 |
|
A- |
A2 |
|
£15m |
6 |
||
|
Leeds (5) |
Specified |
F1 |
P-2 |
|
A- |
A3 |
|
£15m |
6 |
||
|
Nationwide (1) |
Specified |
F1 |
P-1 |
A-1 |
A |
A1 |
A+ |
£20m |
12 |
||
|
Principality (6) |
Specified |
F2 |
P-2 |
|
BBB+ |
Baa2 |
|
£15m |
6 |
||
|
Skipton (4) |
Specified |
F1 |
P-1 |
|
A- |
A2 |
|
£15m |
6 |
||
|
Yorkshire (3) |
Specified |
F1 |
P-2 |
|
A- |
A3 |
|
£15m |
6 |
||
|
(3) Non-UK Banks |
|||||||||||
|
Toronto Dominion (Canada) |
Both |
F1+ |
P-1 |
A-1+ |
AA- |
Aa1 |
AA- |
£30m |
24 |
||
|
Nordea Bank Abp (Finland) |
Both |
F1+ |
P-1 |
A-1+ |
AA- |
Aa3 |
AA- |
£30m |
24 |
||
|
Landwirtschaftliche Renenbank (Germany) |
Both |
F1+ |
P-1 |
A-1+ |
AAA |
Aaa |
AAA |
£30m |
36 |
||
|
NRW.BANK (Germany) |
Both |
F1+ |
P-1 |
A-1+ |
AAA |
Aa1 |
AA |
£30m |
24 |
||
|
Bank Nederlandse Gemeenten (The Netherlands) |
Both |
F1+ |
P-1 |
A-1+ |
AAA |
Aaa |
AAA |
£30m |
36 |
||
|
Nederlandse Waterschapsbank N. V. (The Netherlands) |
Both |
|
P-1 |
A-1+ |
|
Aaa |
AAA |
£30m |
36 |
||
|
DBS Bank Ltd (Singapore) |
Both |
F1+ |
P-1 |
A-1+ |
AA- |
Aa1 |
AA- |
£30m |
24 |
||
|
Overseas Chinese Banking Corporation Limits (Singapore) |
Both |
F1+ |
P-1 |
A-1+ |
AA- |
Aa1 |
AA- |
£30m |
24 |
||
|
United Overseas Bank Limited (Singapore) |
Both |
F1+ |
P-1 |
A-1+ |
AA- |
Aa1 |
AA- |
£30m |
24 |
||
|
Svenska HandelsBanken AB (Sweden) |
Both |
F1+ |
P-1 |
A-1+ |
AA |
Aa2 |
AA- |
£30m |
24 |
||
|
First Abu Dhabi Bank PJSC |
Both |
F1+ |
P-1 |
A-1+ |
AA- |
Aa3 |
AA- |
£30m |
24 |
||
|
Bank of New York Mellon (USA) |
Both |
F1+ |
P-1 |
A-1+ |
AA |
Aa1 |
AA- |
£30m |
24 |
||
Ratings as advised by Link Asset Services 25 January 2023
+ UK Building Societies ranking based on Total Asset size – Source: Building Societies Association Jan 2023
** Where there are multiple counterparties within a banking group, exposure to the overall group will be the largest limit, but exposure to individual counterparties within the group will be based on the individual counterparty limit. E.g., exposure to RBS Banking Group can be up to £30m, but max exposure to Natwest Markets PLC will be £15m.
