Agenda item

Treasury Management Quarterly report

This report is the treasury management review for the quarter ended 31 December 2016. It summarises the Council’s Treasury Management operations during the first nine months of 2016/17. It is presented for the purpose of monitoring and review and meets best practice as suggested by the Treasury Management Code of Practice.


Lyndsey Gamble, Head of Financial Strategy and Planning, presented the report, focussing on the Council’s Treasury Management operations during the first nine months of 2016/17 until the end of December 2016.


An update was provided on further external borrowing being undertaken to finance the recent purchase of an investment property. A first tranche of borrowing was taken in December and is referred to in the report. On 8 March 2017 a second tranche of borrowing was undertaken. This borrowing was in the form of two Public Works Loan Board maturity loans, the first for £8m over 44 years and the second for £9m over 50 years. These were both at an interest rate of 2.46%. It was confirmed that the Council has now undertaken all the borrowing required to support this purchase and at a rate below that within the business case which supported the acquisition.


Investment balances continue to drop due to the reasons highlighted in the report under paragraph 4.7.  The Council is predominantly using a 95 day notice account with Santander and other funds are with Money Market Funds. The current strategy is to continue to review core cash levels and maximise income received.


With regards to the Municipal Bond Agency (MBA), the Head of Financial Strategy and Planning informed the Committee that the MBA are preparing to issue their first bond. One large and several smaller authorities are participating in the issue. Total value is £100m.  The bond will only go ahead if the cost of borrowing is lower than the PWLB. Following a request from the MBA, the London Borough of Sutton has provided its future borrowing requirements for 2017/18 and 2018/19.


The Head of Financial Strategy and Planning also provided an update on changes to MiFID (The Markets in Financial Instruments Directive) since this was introduced in November 2007. She explained that MiFID II will potentially have a greater impact on the Council. The default position under MiFID II is that the Council is rated as a retail client. If confirmed, this would significantly restrict the investments which can be made for treasury management and pension fund purposes.


The Local Government Association (LGA) has warned the Financial Conduct Authority (FCA) of the potential impact on Local Government and conversations are ongoing. We are currently awaiting for further guidance and advice. It was suggested that Audit committee will need a regular update on MiFID and this will be added to the work plan


Questions from Members queried the future of EU legislation, asking whether the Finance department would be looking to adjust the risk register as EU changes take place.  The Head of Financial Strategy and Planning confirmed that officers are already speaking with advisors and thinking about adjusting risk appetite. Members further discussed the experience of staff and financial qualifications and if this is taken into account in the MiFID rating and also if it is taken into account that Advisors are used. The Head of Financial Strategy and Planning explained that these were not taken into account in the draft MiFID proposals, but it was hoped that the FCA might modify this in the final version.


RESOLVED: that the Audit Committee

  1. The Treasury Management activity undertaken during the first nine months of the year be noted.


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