Issue - meetings

To receive the report of the Chief Financial Officer updating the Committee on the Council’s treasury management activities for the first quarter of 2009/10.

The Committee received the report of the London Borough of Haringey’s Chief Financial Officer, Mr Gerald Almeroth, which updated the Committee on the Council’s treasury management activities for the first quarter of 2009/10 and made recommendations to revise the Council’s approved Treasury Management Strategy Statement (TMSS). 

Kevin Bartle, Head of Corporate Finance, gave a presentation outlining the key points of the report under consideration by the Committee, which included updated versions of Tables 1 and 2 of the report showing the Council’s current investment position as at the date of the Committee meeting.

The Committee requested that the full report of the Price Waterhouse Cooper (PwC) review be circulated to all Members of the General Purposes Committee. The Chief Financial Officer stated that the full report had already been provided to the Cabinet but nevertheless agreed to this request.

Mark Horsfield from Arlingclose Ltd, the Council’s Treasury Management advisors,  provided an explanation of the rating system (set by credit rating agencies ) for banks and building societies.  AAA to AA+ are at the higher end of the rating scale and D (for default) was the lowest for long term (more than 1 year) credit.  A different set of criteria was used for short term (less than 1 year) obligations; F1+ being the highest rating.  The Council’s activity had always been with institutions rated at A or A- and above, however, during this time of recession the Council would only invest in institutions with a minimum AA- long term and F1+ short term credit ratings.  The rating system is one of the best tools available but was not the only check conducted by officers before investments are made.

The Committee were advised that the Council is not currently investing in HSBC Bank due to its high investment threshold requiring investments of sums more than £20m and thus outside of the Council’s strategy. 

Among other options considered, Colin Duck, a London Borough of Haringey Treasury Officer, explained that Certificates of Deposit (CDs) were deposits that could be sold in the open market, although this could potentially be at a loss if the counterparty subsequently suffered a credit rating downgrade. The Committee noted that there would be no better return from CDs than fixed term deposits and that there had been no opportunity for the Council to invest in CDs due to the restrictions of the counterparty list. 

Investments in Money Market Funds (MMFs) are in turn invested by the Fund Managers in a wide range of highly rated institutions, which would enable access to institutions beyond the Council’s current approved list and provided preservation of capital.  Councillor Bloch expressed some concerns that MMFs had not always maintained the preservation of capital.  Mr Horsfield recognised the risk but assured members that in the highly unusual circumstance when this had occurred the relevant institutional owners had stepped-in to protect investors.  The difference in returns  between investing in MMFs rather than the Debt Management Office (DMO) was between ¾% and 1% and officers’ advice was  ...  view the full minutes text for item 4