Capital Services Redemption Account

Report of the Comptroller and Auditor General for presentation to the Houses of the Oireachtas

I have audited the Capital Services Redemption Account for the year ended 31 December 2013 under Section 22 of the Finance Act 1950. I have obtained all the information and explanations that I have required.

In my opinion the account, which is in agreement with the accounting records maintained by the National Treasury Management Agency in respect of this activity, properly reflects the transactions for the year ended 31 December 2013 and the balance at that date.

Seamus McCarthy
Comptroller and Auditor General

28 June 2014

Account of Receipts and Payments

Year Ended 31 December

			2013		2013
	Note		€000		€000
Balance at 1 January			360		405
Receipts
Interest Annuity		1,959,426		2,011,484
Sinking Fund Annuity		624,552		645,681
	2		2,583,978		2,657,165
Derivative Transactions	3	76,014,770		17,020,772
Interest on Cash and Other Financial Assets		114,162		130,108
Other Interest		1		26
Commitment and Other Fees	4	12,089		15,460
			76,141,022		17,166,366
			78,725,360		19,823,936
Payments
Redemption of:
Irish Government Bonds Listed on Irish Stock Exchange		619,489		645,555
Other Debt Instruments		5,063		126
			624,552		645,681
Derivative Transactions	3	76,139,480		17,152,053
Interest on National Debt	5	1,960,440		2,025,842
Expenses on National Debt	5	389		–
			78,100,309		19,177,895
Balance at 31 December			499		360
			78,725,360		19,823,936

 

Notes 1 to 5 form part of these financial statements.

John C. Corrigan, Chief Executive
National Treasury Management Agency

26 June 2014

Notes to the Account

1. Background

The Capital Services Redemption Account (“CSRA”) was established under section 22 of the Finance Act, 1950 as amended. The balance in the account is maintained by the National Treasury Management Agency (“the Agency”) at a level subject to guidelines issued by the Minister for Finance under section 4(4) of the National Treasury Management Agency Act, 1990. Under ministerial guidelines, the balance in the CSRA at year end 2013 was to be less than €1 million.

2. Annuities

Under section 22 of the Finance Act, 1950 as amended, annuities are provided for in each year’s Finance Act and are paid into the CSRA from current revenue charged on the Central Fund. A fixed amount may be used for servicing (interest payments) of the public debt. The balance must be used for principal repayments (“Sinking Fund”).

3. Derivative Transactions

The Minister for Finance may enter into transactions of a normal banking nature in accordance with section 54(7) of the Finance Act, 1970 as amended and in accordance with section 67(8) of the Finance Act, 1988.

Transactions of a normal banking nature include portfolio management activities such as forward exchange deals, swaps and interest on deposits which are related to debt servicing costs. Receipts from such transactions, other than those in a currency for which a foreign currency clearing account has been established under section 139 of the Finance Act, 1993, must be received into the CSRA. Such amounts may be used to make payments and repayments in respect of normal banking transactions or towards defraying interest and expenses on the public debt.

In 2013, derivative transactions included:

	€000 Receipts	€000 Payments	€000 Net
NAMA Related Derivatives	23,261,699	(23,261,699)	–
IBRC Related Derivatives	52,424,049	(52,424,049)	–
National Debt Related Derivatives	329,022	(453,732)	(124,710)
	76,014,770	(76,139,480)	(124,710)

 

In 2012, derivative transactions included:

	€000 Receipts	€000 Payments	€000 Net
NAMA Related Derivatives	16,741,446	(16,741,446)	–
IBRC Related Derivatives	–	–	–
National Debt Related Derivatives	279,326	(410,607)	(131,281)
	17,020,772	(17,152,053)	(131,281)

 

Receipts and payments arising from transactions of a normal banking nature include receipts and payments of €23.3 billion (2012: €16.7 billion) arising from derivatives which were entered into with the National Asset Management Agency (“NAMA”) in accordance with sections 52 and 235 of the National Asset Management Agency Act, 2009. Statutory Instruction No. 203/2010 delegates NAMA transactions of a normal banking nature to the Agency. Such transactions are offset by matching transactions with market counterparties and as a result there is no net effect on the account.

The Agency entered into two Collateral Posting Agreements with NAMA under which NAMA is required to post collateral to the Agency when required to do so by the Agency. At end 2013, NAMA had posted collateral of €0.802 billion (2012: €1.15 billion) as part of these Agreements.

Receipts and payments arising from transactions of a normal banking nature include receipts and payments of €52.4 billion (2012: NIL) arising from derivatives which were entered into with the Irish Bank Resolution Corporation Limited (in Special Liquidation) (“IBRC”) in accordance with section 17(4) of the Irish Bank Resolution Corporation Act, 2013. Statutory Instruction No. 57/2013 delegates IBRC transactions of a normal banking nature to the Agency. Such transactions are offset by matching transactions with market counterparties and as a result there is no net effect on the account.

The Agency entered into a Collateral Posting Agreement with IBRC under which IBRC is required to post collateral to the Agency when required to do so by the Agency. At end 2013, IBRC had posted collateral of €0.102 billion (2012: NIL) as part of this Agreement.

4. Commitment and Other Fees

	2013 €000	2012 €000
Refund of Commitment Fees	11,858	15,460
Other Fee Receipts	231	–
	12,089	15,460

 

5. Amounts Applied in Meeting Interest and Expenses on National Debt

	2013 €000	2012 €000
Interest
Fixed Rate Treasury Bonds (Maturity 2013 to 2025)	1,647,361	1,890,602
Amortising Bonds (Maturity 2032)	1,011	–
Floating Rate Treasury Bonds (Maturity 2038 to 2053)	304,188	–
European Financial Stability Facility Interest	–	115,330
State Savings Interest	6,895	5,551
Interest Paid on Credit Support Annex (CSA) Cash Collateral	985	1,290
Irish Treasury Bills	–	701
Short Term Paper	–	12,368
	1,960,440	2,025,842
Expenses
European Financial Stability Facility Fees	389	–
	1,960,829	2,025,842