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CIPFA GUIDE FAILS TO SATISFY ON DEBT

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CIPFA's new Guide for chief financial officers tackles for the first time treasury risk management and the use of b...
CIPFA's new Guide for chief financial officers tackles for the first time treasury risk management and the use of both debt and investment performance indicators.

The guide was published with the long-awaited revised Code of practice for treasury management in local authorities, which in the event contained little substantial change.

The guide, however, contains a new chapter on risk management which identifies the major areas of treasury risk and advises that a passive view on risk management is unlikely to be successful.

A second addition is a chapter on the performance measurement and benchmarking of both investments and debt.

However, UBS managing director John Luke criticised both the guide and the code of practice for neglecting to consider the debt part of the equation in detail. 'The bulk of authorities are debt driven, not investment driven, and the document requires debt indicators but omits to provide them,' he said.

According to UBS, the code also fails to tackle major operational risks by its failure to recommend risk strategies based on anything other than a simple annual approach.

Interest rate cycles are usually three to five years, the company points out. Key current issues, such as local government review and housing stock transfers, should be viewed on a biannual timetable at least.

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