DCLG Proposes Amendment to Bond Investment Regs
0The Department for Communities and Local Government has today launched a consultation paper on proposed changes to the Local Government capital finance system.
Among the changes, intended to come into force on 1 April 2012, is a proposed amendment to the 2003 regulation discouraging local authorities from investing in bond issues of individual companies. The current regulation requires local authorities to treat such transactions “as ‘capital expenditure’, thus reducing the resources available for actual expenditure”. An exemption is currently made for shares or bonds bought through a collective investment scheme, such as a unit trust, because of the perceived spreading of risk across multiple companies.
Today’s consultation sets out the proposal that “this constraint should be removed in relation to bonds. As some authorities have argued, the bonds of an individual company with a triple-A credit rating may be a safer investment option than a collective scheme with a lower rating.”
The closing date for responses is November 22, 2011.
