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 Group’s external borrowing was SEK 42.1 billion at the end of the year, an increase of SEK 1.1 billion compared to 2017. The average remaining term for total borrowing amounted to 3.2 years at the end of the year, with the average fixed interest term 3.8 years. Total borrowing can be divided into borrowing via the City (SEK 38.3 billion) and loans raised by companies outside of the internal bank (SEK 3.8 billion). The part of the debt relating to the tax-funded operation, net borrowing, amounted to SEK 4.2 billion, which accounts for approximately 9.8% of total borrowing. Borrowing via Kommuninvest i Sverige AB mainly took place in the company sector and amounted to SEK 5.1 billion at the end of the year.
The repo rate has been negative since February 2015, which meant the Municipality was able to borrow funds with negative interest on the shortterm programmes. There is, however, an interest floor for EMTN loans, which means that interest can never be less than 0%.
Derivative instruments are used to hedge interest and currencies on underlying loans. The nominal value of the derivative portfolio amounted to SEK 17.0 billion. At the end of the year, the Municipality had a positive market value of SEK 23.8 million on its derivative positions relating to hedging interest on net borrowing.
The Municipality is exposed, through derivative agreements, to the risk that a counterparty is
unable to fulfil its obligations. The counterparties are Swedish and international banks. In terms of business volume, 79% of the counterparty risk lies with counterparties with a rating of at least AA and 21% of the risk lies with counterparties rated A1 to Baa3.
SEK 10.0 billion of the Municipality’s and companies’ loans will mature during the coming year. To meet these obligations, the Municipality has binding loan commitments totalling SEK 8 billion. In addition there are investments in housing bonds of SEK 3.0 billion. The Municipality also has agreements for new loans with the European Investment Bank and the Council of Europe Development Bank.
|Type of risk||Policy||Actual|
|Interest risk (average fixed interest period)||2-6 years||3.8 years|
|Financing risk (average capital commitment period)||2-6 years (long external loans)||3.6 years|
|Counterpart risk (derivative volume per counterparty)||Max 30% of volume per counterpart||Within policy|
|Currency risk (foreign currency exposure)||None||Deviation as purchase of new trams has not
been fully hedged (CEB 25/01/2017)
Last updated: August 30, 2019