Risk management in the City of Gothenburg is centralised and managed by the Treasury Office. It is the City’s finance policy and City Council’s delegation of power that govern risk management in the City and its companies. The various risks the City meets are interest rate risk, financing risk, counterparty risk, currency risk and operational risk.
Finance policy 2015
(Last version in english, version in swedish available for year 2016)
The external borrowing of the City and the companies totalled 38.8 billion SEK at the turn of the year (2016), an increase of 0.4 billion compared with 2015. The average maturity for overall borrowings at the turn of the year was 3.4 years and the fixed interest term was on average 3.7 years. Total borrowings are divided into borrowing via the Treasury Office (31,5 billion), Förvaltnings AB Framtiden (4,3 billion) and loans raised by the companies outside the treasury (3.0 billion). The tax-financed business portiton of the debt, net borrowings, totalled 4,5 billion SEK.
During the same period the nominal value of the derivative portfolio totalled 18,5 billion SEK. Derivatives are used for the purpose of hedging and the instruments most used are interest rate swap (IRS) and cross-currency swaps.
Through derivative agreements the City is exposed to a risk that a counterpart cannot fulfil its obligations. The counterparts are both Swedish and international banks. Calculated on the volume of business, 74 per cent of the counterpart risk was with at least AA rated counterparts and 26 per cent of the risk was with at least A3 rated counterparts.
Debts are to be spread over several loans and terms, so that the financing risk is limited. The average period of maturity for long-term loans should lie in an interval of 2-6 years.
In the coming year the City has loans of 5,9 billion SEK due that need refinancing. According to the City’s finance policy, liquidity supply through binding agreements with banks and credit institutes should cover total loans maturing for the next 12 months. At the present time the City has binding loan commitments totalling 9 billion SEK.
|Type of risk||Policy||Actual|
|Interest rate risk||2-6 years||3.84 years(communicated)|
|Financing risk||2-6 years||2.54 years|
|Counterpart risk||Max 30% of volume per counterpart||Within policy framework|
Last updated: April 21, 2017