The Portfolio Holder for Finance & Resources presented a report which sought approval to contribute to the Local Government Association’s Municipal Bonds Agency (MBA) which it believed would allow councils to raise funds at a lower rate than those offered by the Public Works Loan Board (PWLB).  Since the Advisory Committee had met, more information had been available with regards to the LGA’s Municipal Bonds Agency.  The LGA had known commitments of £2.9m against a benchmark of £400,000 which had come from 22 councils of different types and sizes so far, and had been informed that it would receive a AAA rating.   That gave confidence that the investor base would grow significantly over the rest of the year.  The Chief Finance Officer advised that a letter had already been sent expressing an interest as the deadline for doing so had been noon that day, but this did not bind the Council to a decision.  It had been made clear that an early indication would benefit from more favourable terms.  If Cabinet agreed to contribute to the Municipal Bonds Agency, a full subscription agreement would be sent out to confirm the investment.

The report also revisited previous discussions on the use of non UK banks for the placing of investments.  The Council’s investment strategy had always allowed for investment in non-UK banks however this had ceased in the aftermath of the 2008 financial crisis. The issue had been the subject of discussion at previous meetings of Finance & Resources Advisory Committee and the Finance and Resources Advisory Group before that.  To date the preference had been to continue to only lend to UK banks and building societies even though the current policy did allow lending to non UK banks.  The report suggested that it might be prudent to consider lending to other highly rated non UK banks that appeared on the treasury advisor’s recommended lending list, and that minimum long term Fitch rating of AA-, the same as that of Handelsbanken, could be a useful benchmark. This would then include banks in countries such as Australia, Canada, Netherlands, Singapore and UAE (amongst others). The duration of the investment would be determined by reference to the treasury advisor’s colour-coded matrix and initially the lending limit could be set at half that of the UK banks (i.e. £3m per counterparty). 

Members noted and considered the relevant minute detailing the Advisory Committee’s discussions and their recommendations.  The Advisory Committee were recommending to lend to non UK banks but requesting delegated authority to specifically choose which ones.

The Chief Finance Officer advised that if Cabinet agreed the recommendations it was intended to operate an instant access account with Handelsbanken as the rates were favourable.

Public Sector Equality Duty

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

Resolved:  That

a)        the Council contribute up to £50,000 towards the set up costs and operating capital of the LGA’s Municipal Bonds Agency, and authority be delegated to the Chief Finance Officer, in consultation with the Portfolio Holder for Finance and Resources, to agree the final level of contribution;

b)     delegated authority be given to Finance & Resources Advisory Committee to specifically approve which non UK banks on the Council’s treasury advisor’s recommended lending list with a minimum long term Fitch rating of AA- are invested in, with the duration of the investment determined by reference to the treasury advisor’s colour-coded matrix and the lending limit set at half that of the UK banks (i.e. £3m per counterparty) as detailed within the report; and

c)         Handelsbanken be approved for lending up to £3million.