It was reported that the Local Government Act 2003 (the Act) and supporting regulations required the Council to ‘have regard to’ the Prudential Code and to set Prudential Indicators for the next three years to ensure that the Council’s capital investment plans are affordable, prudent and sustainable.  The Act therefore required the Council to set out its treasury strategy for borrowing and to prepare an Annual Investment Strategy (as required by investment guidance issued subsequent to the Act) which set out the Council’s policies for managing its investments and for giving priority to the security and liquidity of those investments.  Members’ attention was drawn to paragraphs 61-64 of the report and Appendix F, which dealt with proposed changes to the investment criteria.  The Principal Accountant explained that data referring to the capital programme had been left blank at this stage as it was still to be approved.

Some Members were keen to open up to new counterparties, including banks in countries such as Sweden, Australia and Singapore that operated in the UK.  However it was agreed that this should be brought back for further consideration.

Public Sector Equality Duty

Members noted that consideration had been given to impacts under the Public Sector Equality Duty.

Resolved:  That it be recommended to Cabinet that

a)        the following amended investment criteria be included in the Treasury Management Strategy for 2014/15:

                                  i)          Maximum investment period of 2 years.

                                ii)          Investments in any single institution or institutions within a group of companies be limited to 25% of the total fund, at the time the investment is placed, except it be increased for Lloyds Banking Group plc and Royal Bank of Scotland Group plc to 30%.

                              iii)          Total investments in any one foreign country be limited to 15% of the total fund, but UK-based institutions to be used as first preference.

                              iv)          Investments in banks be limited to £6m per counterparty excluding call accounts and £7m including call accounts except for Lloyds Banking Group plc and Royal Bank of Scotland Group plc, where the limits would be £10m for each with no distinction between fixed deposits and call accounts.

                                v)          If the Council’s own banker, Barclays, falls below Capita Asset Services’ minimum credit rating requirements, it would nevertheless continue to be used, although balances would be minimised in both monetary size and duration.

                              vi)          Building Societies with assets in excess of £9bn be included in the lending list with a maximum investment limit of £2m each and a maximum duration of 100 days. If a Building Society meets Capita Asset Services’ minimum credit rating requirements, the investment limit be increased to £5m with a maximum duration of two years.

                            vii)          Enhanced Money Market Funds (EMMF) to be used as an alternative to the existing standard Money Market Funds (MMF) with a combined maximum limit of £5m per provider.

b)        Property Funds with a limit of £5m in each not be included at this time;

                       c)          investments in non-UK banks not be included at this time, but the matter be brought before a future meeting of the Committee for further consideration; and

                      d)          it be recommended to Council to approve the amended Treasury Management Strategy for 2014/15.