Report by the Municipality Finance Working Group, 20/2011

Summary

The purpose of the working group was to assess whether it might be necessary to amend legislation governing the operations of Municipality Finance plc and the Municipal Guarantee Board, with a view to ensuring that the tightening of international financial markets regulation will not hamper local government financing and to present pertinent proposed action.

Unless central and local government invest substantially more in Municipality Finance plc, the impending tightening of financial markets regulation in the next few years could considerably hamper the organization?s operation. Transferring market-based local government financing to the private financial sector would not be a viable solution, as tougher capital requirements will curb the possibilities of credit institutions to expand lending.

Hence the working group proposes that, in the context of ongoing EU financial regulation projects, effort be made to safeguard that EU regulations currently being drafted do not include requirements that would significantly restrict the operation of Municipality Finance plc. The planned binding leverage ratio restriction is seen by the working group as particularly problematic.

The working group proposes that if it is not possible to take into account the special status of Municipality Finance plc to a sufficient extent in forthcoming EU regulation, then forward planning to amend national legislation is called for so that Municipality Finance plc may continue operating without a credit institution license. It is the working group?s understanding that there are no internal market restrictions for the proposed action.

Language versions

• Kuntarahoitustyöryhmän muistio, 20/2011
  12.04.2011
• Arbetsgruppen för finansiering av kommuner, 20/0211
  12.04.2011

Printable version