Report of the Chamberlain
The Board considered a report of the Chamberlain setting out the City’s Treasury Management Strategy Statement and Annual Investment Strategy for 2019/20. The Board noted the colour copies of the Strategy provided and that changes made from the previous year’s strategy were marked in yellow. The Board also noted the addendum tabled by the Chamberlain setting out changes to the capital programme. These revisions would be incorporated into the report submitted to the Finance Committee. The Chamberlain advised that the strategy had been amended by the Court of Common Council in December 2018 to include a borrowing policy for City’s Cash.
The Board discussed the parameters for maximum loan durations and investment and borrowing limits. The Chamberlain advised the Board that the limits were generally there to provide flexibility and keep options open in case a good opportunity arose. All local authorities had to set an authorised limit for external debt and the figures given represented the upper threshold.
The Board noted the table setting out maturity structure of borrowing, and was advised that this addressed refinancing risk, allowing for the spread of debt for maturity at different times. This would mitigate the risk of the City Corporation having an excessive amount of debt to refinance in any one period. A Member queried the upper limit of 50% allocated for borrowing under 12 months or less, and suggested that 25% may be more appropriate as it encouraged discipline and carried less risk. The Chamberlain advised that the recommended limit allowed flexibility. The Board then discussed approved counterparties and their investment limits, noting that Lloyds, as the bank used by the City Corporation, required a higher limit for greater flexibility, otherwise the limit for UK banks was £100 million.
A Member asked whether the limits on lending to foreign banks were too low. The Chamberlain responded that the limits had been set at £25 million for some time, as Members had previously been against having a large exposure to foreign banks. The limits could be raised if Members were minded to do so. The Board suggested that officers review the limits, and bring a report back if substantial due diligence would be required before raising the limits. However, if the changes could be made easily made, the Board agreed to delegate authority to the Town Clerk, in consultation with the Chairman and Deputy Chairman, to consider a report recommending that the limits be amended ahead of the submission of the Treasury Management Strategy to the Court of Common Council.
RESOLVED – That the Financial Investment Board:
a) Delegate authority to the Town Clerk, in consultation with the Chairman and Deputy Chairman, to consider a review of the maximum lending limits to foreign banks ahead of the submission of the Treasury Management Strategy to the Court of Common Council; and
b) Pending the above decision, approve the Treasury Management Strategy and Annual Investment Strategy for 2019/20, and submits it to the Finance Committee and the Court of Common Council as part of the City Fund – 2019 Budget Report for formal adoption.