Memorandum from Bournemouth Borough Council (LAI 14)

 

I wish to submit the following comments to your inquiry:-

 

 

· This Authority has never invested in an Icelandic bank and indeed they have never been on our counterparty list.

 

· The amount this Authority has invested is approximately £80m and are budgeting on a return of some £4.8m for 2008 / 09. This is a significant figure in our budget and any reduction in the amount because of a restriction in our investment strategy would have a major impact.

 

· We work within a Treasury Management Strategy approved by Council each year who approve the list of counterparties that we are allowed to invest with. In addition to this annual review at a high level, the Treasury Management Team constantly monitor the market and the ratings of the counterparties and react accordingly.

 

· This resulted in Northern Rock, Bradford and Bingley and Alliance and Leicester being removed from our counterparty list in advance of their difficulties.

 

· Any restrictions in our counterparty list would also have an impact on those institutions. Any distortion of the market, through regulation, could affect these institutions adversely and cause problems in the money market.

 

· The significance of the amounts invested by Local Authorities in the money markets should not be underestimated.

 

· The bringing in of any regulations would be against the recent trend of deregulation that has been put in place eg Prudential Borrowing.

 

 

December 2008