• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • Slough welcomes commitment that Office for Local Government ‘will not be a burden’

    June 30, 2022

  • Homes England agrees strategic partnership with two authorities

    June 29, 2022

  • Soaring inflation and pay pressures to add £3.6bn to council budgets

    June 28, 2022

  • Underfunded social care reforms could ‘exacerbate workforce pressures’

    June 27, 2022

  • Nottingham City Council leader labels proposed intervention as ‘disappointing’

    June 27, 2022

  • Government preparing to intervene in Nottingham City Council

    June 23, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Arlingclose launches system for rating local authority creditworthiness

0
  • by Colin Marrs
  • in 151 News · Treasury
  • — 25 Oct, 2018

Treasury adviser Arlingclose will next month launch a new rating system to rank the financial strength of local authorities, which it says will complement a similar initiative launched by the Chartered Institute of Public Finance and Accountancy (CIPFA).

The firm will award gold, silver and bronze rankings to authorities, based on a series of indicators, namely level of indebtedness, interest cost burden, income flexibility, the level and rate of use of revenue reserves, and budgetary control.

However, unlike CIPFA’s “traffic light” financial resilience rankings, plans for which were revealed earlier this year, Arlingclose’s will only be available to councils lending to other authorities through its online platform.

David Blake, strategic director at Arlingclose, told Room151: “Authorities have asked for analysis of their peers, and we are responding to that demand.

“Our analysis is different to CIPFA’s proposed financial resilience index — we’re focusing on financials and credit metrics including debt servicing costs, rather than Ofsted ratings, auditor VFM judgments or social care expenditure. But there is certainly some overlap, particularly on the level and use of reserves.

“There is no harm in having a different set of metrics. It is not a competition.”

Blake said that the ratings would not be a definitive guide to financial strength, but an indication of underlying risk, based on publicly available information, to alert councils to where further due diligence might be needed before a loan is completed.

He said: “We think it is appropriate for local authorities to ask about the creditworthiness of counterparties. Some lend over £200m to other local authorities.”

 “At the moment a lot of local authorities aren’t doing any due diligence. You couldn’t easily analyse all the information before. This fills that gap and acts as a starting point.”

He also warned that the information on which the new rankings are based is reliant on local authority staff completing government returns in accordance with the guidance notes, which is not always the case.

Where blatant errors in returns appear, Arlingclose will correct them, but other errors may slip through, he said.

“We are quite clear on the limitations of the analysis. We can’t get a level of detail that a ratings agency might get, at least not across hundreds of authorities, but it is a step in the right direction.

“We believe this is consistent with best practice, as per CIPFA’s Treasury Management Code of Practice, particularly the requirement to hold well-documented records of the standing of counterparties an authority deals with.”

Unlike CIPFA’s proposed code, which is set to be published annually, the Arlingclose rankings will be updated every quarter.

The rankings will not be published more widely, to avoid them being “manipulated by the media or opposition councillors”, Blake said.

“We want to deliver financial strength ratings discretely, showing the ratings of those looking to borrow to a compatible lender only when orders are matched”, he added.
Blake said that credit default by councils, especially over the short-term durations of most authority-to-authority transactions, was possible, but unlikely.
“Rating authorities in this space is more about complying with the treasury management code of practice, understanding the risk profile of counterparties and managing reputational risk,” he said.

Get the Room151 Newsletter

Share

You may also like...

  • Investing today: nowhere to hide 20th May, 2022
  • No ‘fire sale’ of treasury assets under new Prudential code 8th Oct, 2021
  • Government welcomes devolution bid by four Midlands councils 16th Jun, 2022
  • Impact Awards: A week to go before deadline 22nd Apr, 2021

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Homes England agrees strategic partnership with two authorities
    • Soaring inflation and pay pressures to add £3.6bn to council budgets
    • Underfunded social care reforms could ‘exacerbate workforce pressures’
    • Nottingham City Council leader labels proposed intervention as ‘disappointing’
    • Government preparing to intervene in Nottingham City Council
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 17 hours ago

    Hillier confirmed as keynote speaker for LATIF/FDs’ Summit: Dame Meg Hillier, chair of the Public Accounts Committee, has been confirmed as a keynote speaker for Room151’s combined Local Authority Treasurers Investment Forum (LATIF) and FDs Summit. The… dlvr.it/ST70F7 pic.twitter.com/hxV676Iley

    Room151 17 hours ago

    Councils’ funding at risk due to ‘undercounting’ in census data: Population estimates in London and Manchester may have been significantly underestimated in the 2021 census potentially threatening government funding for frontline services in these… dlvr.it/ST707J pic.twitter.com/VncIyaXa01

    Room151 3 days ago

    Gove at LGA: councils to receive two-year financial settlement: Michael Gove has announced that councils will receive a two-year financial settlement from next year to provide authorities with “financial certainty” and allow them to plan ahead. The… dlvr.it/ST0kSV pic.twitter.com/wxL3UM4sGO

    Room151 3 days ago

    LGPS valuations: the digital journey: Rob Bilton explains how technology is helping to deliver one of the most complex data exercises in the world of public sector pensions. The 2022 valuations for LGPS funds in[...] dlvr.it/ST0kMq pic.twitter.com/VxjSPC2Uvo

    Room151 7 days ago

    Conrad Hall: ‘more sophisticated’ regulation needed for local government: The chair of the CIPFA/LASAAC Code Board has questioned the sophistication of financial regulation in local government and the continuing focus of the Department for Levelling Up,… dlvr.it/SSnPBV pic.twitter.com/G5d7JCWF8c

    Room151 1 week ago

    Slough Council approves plans to restructure finance department: Slough Borough Council has approved plans to restructure its finance department to enhance capacity and capability and to address a “significant weakness” in the function. The local… dlvr.it/SSf8DG pic.twitter.com/l5lmyHmkBg

  • Register to become a Room151 user

  • Previous story Government agrees to earlier settlement timetable
  • Next story Central banks, the age of populism and local authority investors

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares