Agenda and minutes

Minutes of the Meeting held on 24^th September, 2008 (previously circulated). 

The Minutes of the meeting held on 24^th September, 2008 were agreed and signed as a correct record.

There were no items of urgent business authorised by the Chairman.

There were no declarations of interest.

Report to follow.

The City Council's Treasury Management Consultants will be in attendance to make a short presentation.

The Head of Financial Services presented a report that provided Members with the details surrounding the placing of investments with Icelandic banks and information regarding recovery action. It was reported that the City Council had three investments in three different Icelandic banks totalling £6 million. It was noted that the dates on which the City Council entered into the contractual agreements, i.e. the trade dates, were in either January or May 2007.

It was reported that these contractual agreements were entered into in line with the City Council’s investment principles and objectives which are set out in the Council’s Investment Strategy and the CIPFA Code of Practice on Treasury Management. It was noted that the main principles governing the City Council’s investments criteria were the security and liquidity of its investments before yield. Members were informed that the security of investments was managed primarily through the use of credit ratings from three main agencies – Fitch, Moody’s and Standard and Poor’s.  These generally determine the institutions that investments can be placed with.

It was noted that in managing its investment portfolio, typically the Council may hold a mix of fixed term short dated investments, longer dated investments, forward deals and also monies in ‘call accounts’, where deposits can be recalled at any time and so are not fixed for a term.  The mix would depend on cash flow needs, interest rate prospects and budgetary considerations. 

Two of the Icelandic investments were forward deals, where a contractual obligation is made at the trade date, to place money with the institution concerned at a later date.  Decisions to take out forward deals would be based on normal investment criteria, albeit taking a slightly longer term view.  At the time when these investments were traded (and subsequently placed), there was no objective information to indicate that the banks’ credit ratings would subsequently plummet, and therefore no information to justify not investing the money as contractually required to do so.

Regarding monitoring, it was reported that quarterly monitoring reports of treasury management were submitted through Performance Review Team (PRT) meetings and that an annual report was submitted (via Cabinet) to Full Council.

In terms of prospects for recovery, Members were informed that the Local Government Association had become involved on behalf of all Councils.  It was hoped that more information would become available in the coming weeks, regarding the assessment of how much authorities might receive and when, and how authorities should approach their budget setting. Until that time, it is not possible to provide any reasonable estimate of what the financial implications might be.  It was reported, however, that a bid would be made to the Government’s Capitalisation bidding round which would allow the Council to spread any losses over a number of years.

The Corporate Director (Finance and Performance) reported that Officers had already prepared a report on the Medium Term Financial Strategy which went to Cabinet in November. It was noted that this would be an ongoing process  ...  view the full minutes text for item 22.