Agenda item

The committee will receive information in accordance with the CIPFA Treasury Management Code of Practice and the Prudential Code on the following matters:

·        details of capital financing, borrowing, debt rescheduling and investment transactions in 2010/11;

·        an assessment of the risk implications of treasury decisions and transactions;

·        details of the outturn position on treasury management transactions in 2010/11;

·        Compliance with treasury limits and Prudential Indicators.

The report will further  update members on treasury management activity during the first quarter of 2011/12.

In line with the committee’s terms of reference they received a report on the treasury management activity and performance in 2010/11. They further  received an update on the Treasury management activity for the first financial quarter of the 2011/12 year.  The  council were continuing with the emphasis  of internal borrowing as opposed to external borrowing. The  investment balances were considerably invested in Money Markey accounts and the committee learned that  the council had received £11m back from previously invested Icelandic deposits. In  April 2011 the  Icelandic District court ruled that Local Authority deposits  in Landsbanki and Gltnir had priority  status but  other creditors had challenged this decision. Therefore a Icelandic supreme court hearing was expected in 2011 which would determine the expected rate of recovery for these remaining deposits.

Further key information noted by the committee were that Clydesdale  bank had been suspended from the Council’s lending list following  Moody’s review of its long term rating. There had been one breach of the lending   limits agreed by the council in February 2011. This was a single day following which procedures had been reviewed to ensure this did not happen again.

Comments  on the report were put forward by the committee:

What the safeguards in place to ensure that the breach did not happen again? The committee were given assurance  that a number of measures were in place to detect when money markets  were at low levels  meaning action was required.  There was an alert system in place which managers had access to advising the amounts for investment  in and the level of management that was required to agree these.   The committee were aware that there were,  apart from the ratings available from credit rating agencies, other checks in place to ascertain the credit worthiness of  banks and financial organisations, and asked how these checks had been put to recent  use. It was noted that withdrawal of Clydesdale bank and Santander UK  from the councils lending list had arisen  from  determining creditworthiness as a whole and not relying solely on the credit rating agencies advice.

 In response to questions on the  cost of borrowing from the PWB , it was noted that this was at a  good rate of  35per £1000k borrowed . The cost of borrowing from another local authority was   less than £100, which was paid for a broker fees.

In response to the suggestion that cash flow forecasts could be included in the quarterly financial report considered by cabinet, the lead finance officer advised that  this information could be mentioned in the report to cabinet but it was important to note that a lot of issues impacted on these forecasts.

Information was sought on the likely timescales for  returning back to the council the total funds invested with Icelandic  banks.  In response it was noted that the exact time lines  could not  be predicted  but it was likely to be a matter of years.  In was important to note that the Heritable position would not be affected by the supreme court judgement and the council would receive the 11.2m as part of the administration process for Heritable bank.

RESOLVED

1. That the Treasury management activity and performance during 2010/11 in accordance with the CIPFA Treasury management Code of Practice be noted.

2. That the Treasury management activity for the first quarter of 2011/12 be noted .