I have been closely monitoring with the finance team the recent turbulence on the London and international money markets.
The Council agrees a Treasury Management Policy in February each year, which prescribes the institutions, credit ratings and limits on lending that govern our investment of the Council’s investments of £40-50m. This policy is being followed strictly.
Over recent months, the application of the Treasury Management Policy was tightened in the light of the higher risks in the money markets. This was done by using only those institutions that had a credit rating better than that prescribed in the policy.
This week I agreed a further tightening of our operational arrangements:
* A cessation on forward deals – these are agreements to lend an amount at a future date for a prescribed period of time.
* No further long term lending to be undertaken i.e. lending over 1 year.
* Limits on the arrangements for short term lending.
These are all aimed at reducing the risks the Council faces on its investments.
Our advisors, Butlers have told us that there may be some risk associated with the Council’s investment with Glitnir bank, based in Iceland.
The Council currently has £2m invested with Glitnir and it is not possible to assess the implications for this investment at present. As a term depositor, we will be relatively high up the order of creditors if the bank is liquidated and assets realised.
Members may have seen that the LGA is pressing Government to safeguard these investments by local authorities.
I am continuing, with the finance team, to monitor the position and should there be any further significant developments, I will let you know.
Thursday, 9 October 2008
Rushmoor's Finance Director's letter to Councillors