Neville Murton, Divisional Director for Finance, Procurement and Audit presented the Treasury Management quarterly update report stating the report updated Members on the Council’s borrowing and investment opportunities from 1^st April 2017 to 30^th September 2017. It provided a summary of the Prudential and Treasury indicators as well as information on the projected investment returns.

He said the Council had earned an average return of 0.53% on its lending, outperforming the rolling average 7 day LIBID rate of 0.11%.

Neville Murton referred Members to tables 2 and 3 on page 93 of the agenda pack and said the Corporate Finance team was working closely with Arlingclose – the Council’s Treasury Management Consultant’s to consider ways to improve investment returns taking into account risk appetite in addition to how the increase in the interest base rate will affect investments in the long term. 

Mr Murton referred to the ‘opt out’ status under the MiFID process and referred Members to Appendix 4. Treasury Management was working closely with their advisors before continuing with investments.

Members of the Committee asked the following questions:

·         In reference to LOBO’s, what has been done to reduce the cost of these investments?

The interest rate on these products are ‘fixed’ unless the lender exercises their option to increase at which point the Council has the option to repay without penalty. However, in the current climate that is not expected to happen. The premia costs of redemption, in the absence of the lender option being exercised, was currently prohibitively expensive amounting to around 98% of original capital loan value. Increases in interest rate does improve the position but the recent modest rise will not have a significant impact. This is kept under review with the Council’s advisers.  

·         Are we achieving a good return for our investments?

The Council is meeting our advisers in the next week to look specifically at ways to improve our investment returns as part of the Council’s MTFS.

·         In reference to lending to other Authorities - to whom are we lending money to?

The Council lends to other local authorities to support their cashflow needs; inter authority lending is relatively common as there is a clear understanding of the counterparty risk from those transactions.

·         In reference to page 108 – Canada seems a favourable country to invest. Is there a particular reason for this?

We will look into that aspect and report back to a future meeting of the Committee.    

Members of the Committee NOTED:

1.    The contents of the treasury management activities and performance against targets for half year ending 30^th September 2017;

2.    The Council’s outstanding investments which amount to £447.1m at 30^th September 2017 (Appendix 2)

3.    The potential impact on the Council of becoming a retail clients with effect from 3^rd January 2018 as set out at section 3.7; and

4.    The protections available to retail clients that the Council will forgo as a result of opting up to professional client (Appendix 4)