Local authority treasurers will be familiar with many different Codes, with CIPFA’s Treasury Management Code of Practice (TM Code) and The Prudential Code for Capital Finance in Local Authorities (Prudential Code) being the major ones. Another code that is perhaps less familiar is the UK Money Markets Code.
We have previously written about this Code, shortly after its publication by the Bank of England in 2017 (see link here). The voluntary Code sets out the standards and best practice expected from participants in the deposit, repo and securities lending markets with the aim of promoting and maintaining the integrity and effective functioning of the UK money markets.
Are local authorities participants in these markets? Definitely – and as the document itself states “all Local Authorities in the UK, whatever their size, are covered by the Code”
As we previously highlighted, local authorities may well have already embedded some of the important principles of the Money Markets Code within their treasury documentation by way of adhering to CIPFA’s Treasury Management Code of Practice, particularly within the ‘Schedules’ of LAs Treasury Management Practices (TMPs) documents. It would be sensible to revisit these schedules in light of the Money Markets Code in order to ensure your council’s approach to transacting in the money markets is in line with best practice.
Due to the coronavirus pandemic, many staff will now be working from home and are likely to do so for some time. It remains important to ensure that TMPs and appropriate procedures continue to be followed when undertaking investment transactions in a remote-working situation.
Arlingclose regularly meets with representatives of the Bank of England’s Sterling Markets Division and the Bank is keen that local authorities not only have regard to the Money Markets Code but also publicly state their commitment to conducting UK Money Market activities in adherence with the principles of the Code.
Many organisations, including Arlingclose via its iDealTrade matching platform, have done just this by issuing ‘Statements of Commitment’ to the Code and requesting that their Statements be included on the public register maintained by the Bank on its website.
The Code is expected to apply to all UK Market participants, and as well as the investors and borrowers this includes money brokers. Local authorities will likely have relationships with several brokers, helping to source deposits, loans, CDs, bonds and other instruments. Local authorities may wish to ask their brokers whether they have also issued a statement of commitment to the Code, and if not then enquire as to their approach to maintaining best practice and market standards.
While we appreciate treasury teams’ focus will be elsewhere during the ongoing pandemic, we would encourage local authorities to consider undertaking the simple process of publicly committing to the Money Markets Code. As a Statement of Commitment does not need to be updated annually, we suggest it could be included in local authorities’ Treasury Management Policy Statements.