Issue - meetings

This report provides an update on treasury management performance for the first six months of 2018/19.

Prior to receiving a presentation from Nazmin Miah, Associate Director of Link Asset Services, the Panel considered a report that updated members on treasury management performance for the first six months of 2018/19.

It was noted that interest rates continued to be low but it was hoped that these would improve.  Whilst Aberdeen Asset Management still consistently produced returns above the benchmark, the Council had reduced its investments in externally managed funds and used the funds for internal borrowing. Internal borrowing helped mitigate the current state of the market.

The presentation covered an update on the legal and regulatory requirements in relation to treasury management, a market update, and the Council’s position.

In respect of the legal and regulatory requirements, it was highlighted that these were moving away from a prescriptive approach to allowing a more commercial approach with certain caveats. In particular, the CIPFA Codes issued in 2017 placed an emphasis on monitoring non-treasury activity.  In relation to investment property purchases, local authorities were advised to seek legal advice in the light of recent MHCLG statutory guidance and the requirement to produce a Capital Strategy to underpin capital expenditure plans was also highlighted.

In relation to treasury management at the current time, there was still significant uncertainty over the direction of the UK economy, which could lead to market volatility in the financial sector. Whilst the forecast was for a slow steady increase in interest rates, borrowing was still cheap at current levels: however, the costs of carry remained a key consideration.

In terms of the Council’s current position, internal borrowing was saving the Council £500K per annum in interest payable.  In terms of the Council’s investment portfolio, the Council’s counterparties had good credit ratings and all had passed the stress test but the Council needed to appreciate the risks in relation to property funds.

Prior to taking her leave of the meeting, the Chairman thanked Ms. Miah for the presentation and for the support provided to the in-house team.

Accordingly, the Panel noted the performance on return of investments for the first six months of 2018/19 and the current investment decisions being made within the terms set out in the Treasury Management Strategy.