National Debt of Ireland

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

National Debt of Ireland

I have audited the financial statements of the National Debt of Ireland for the year ended 31 December 2013 under the National Treasury Management Agency Act 1990. The financial statements, which have been prepared under the accounting policies set out therein, comprise the accounting policies, the service of debt statement, the national debt statement, the national debt cash flow statement, the statement of movement in national debt and the related notes. The financial statements have been prepared in the form prescribed under section 12 of the Act and on the basis set out in paragraph (b) of the accounting policies.

Responsibilities of the National Treasury Management Agency

The National Treasury Management Agency (the Agency) is responsible for the preparation of the financial statements, for ensuring that they properly present the balance outstanding on the national debt at year end and the debt service cost for the year, and for ensuring the regularity of transactions.

Responsibilities of the Comptroller and Auditor General

My responsibility is to audit the financial statements and report on them in accordance with applicable law.

My audit is conducted by reference to the special considerations which attach to State bodies in relation to their management and operation.

My audit is carried out in accordance with the International Standards on Auditing (UK and Ireland) and in compliance with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of Audit of the Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements, sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of

• whether the accounting policies are appropriate to the circumstances, and have been consistently applied and adequately disclosed
• the reasonableness of significant accounting estimates made in the preparation of the financial statements, and
• the overall presentation of the financial statements.

I also seek to obtain evidence about the regularity of financial transactions in the course of audit.

I read the information in the annual report of the Agency to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report.

Opinion on the Financial Statements

In my opinion, the financial statements, which have been properly prepared in the form prescribed under section 12 of the National Treasury Management Agency Act 1990 and on the basis set out in paragraph (b) of the accounting policies, properly present the balance outstanding on the national debt at 31 December 2013 and the debt service cost for 2013.

In my opinion, proper books of account have been kept by the Agency. The financial statements are in agreement with the books of account.

Matters on which I report by exception

I report by exception if

• I have not received all the information and explanations I required for my audit, or
• my audit noted any material instance where public money has not been applied for the purposes intended or where the transactions did not conform to the authorities governing them, or
• the information pertaining to the national debt in the Agency’s annual report is not consistent with the related financial statements, or
• I find there are other material matters relating to the manner in which public business has been conducted.

I have nothing to report in regard to those matters upon which reporting is by exception.

 

Seamus McCarthy
Comptroller and Auditor General

30 June 2014

Accounting Policies

(a) Background

Under the National Treasury Management Agency Act, 1990, The National Treasury Management Agency (“the Agency”) performs borrowing and National Debt Management functions on behalf of the Minister for Finance.

Pages 49 to 65 set out the financial statements of the National Debt of Ireland. The form of the statements has been approved by the Minister for Finance under section 12 of the National Treasury Management Agency Act, 1990.

The financial statements of the National Debt include disclosure notes in relation to the National Loans Advance Interest Account, the National Loans (Winding Up) Account, the National Treasury Management Agency (Unclaimed Dividends) Account, the Deposit Monies Investment Account and the Account of Stock Accepted in Payment of Inheritance Tax and Death Duties. These accounts were presented separately prior to the 2012 financial statements. As they are operational accounts set up for specific purposes, their cash balances are not included with the Exchequer account balance reported under Cash and Other Financial Assets in the National Debt Statement.

(b) Basis of Accounting

The measurement basis adopted is that of historical cost except where otherwise stated. Transactions are recognised using the cash basis of accounting.

The National Debt Statement is a Statement of the total amount of principal borrowed by Ireland not repaid at the end of the year, less cash and other financial assets available for redemption of those liabilities at the same date. The Minister for Finance under various statutes also guarantees borrowings by the State and other agencies. These guarantees are not included in these financial statements.

(c) Reporting Period

The reporting period is for the year ended 31 December 2013.

(d) Reporting Currency

The reporting currency is the euro, which is denoted by the symbol €.

(e) Receipts and Payments

Receipts and payments relating to the National Debt through the Exchequer Account, Foreign Currency Clearing Accounts and the Capital Services Redemption Account (“CSRA”) are recorded at the time the money is received or payment made.

(f) Liability Valuation

Debt balances are recorded at redeemable par value.

(g) Derivatives

Swap agreements and other financial instruments are entered into for hedging purposes as part of the process of managing the National Debt. The results of those hedging activities that are linked with specific borrowing transactions are recognised in accordance with the underlying transactions. The net fund flows arising on hedging activities that are not linked with specific borrowing transactions are included in debt service costs at the time the funds are received or payment made. Where swaps are terminated or converted into other swap instruments the net fund flows affect debt service in accordance with the terms of the revised instrument.

(h) Foreign Currencies

Receipts and payments in foreign currencies are translated into euro at the rates of exchange prevailing at the date of the transaction. Liabilities and assets in foreign currencies are translated into euro at the rates of exchange ruling at the year end date.

(i) Maturity Profile

Medium/Long Term Debt is debt with an original maturity of more than one year and Short Term Debt is debt with an original maturity of not more than one year.

Service of Debt Statement

Year Ended 31 December

		2013	2012
	Note	€000	€000
Interest Paid
Medium/Long Term Debt	2	7,075,211	5,481,813
Short Term Debt	3	25,245	38,881
State Savings Schemes	4, 10	349,952	283,502
Other Movements	5	(993)	3,288
Sinking Fund Payments	6	624,552	645,681
Fees and Expenses	7(a)	96,463	104,002
Expenses of the Agency	7(b)	37,938	40,077
Interest Received on Deposits, Treasury Bills and Other Financial Assets		(125,204)	(128,818)
Total Debt Service Cost	1	8,083,164	6,468,426

 

Notes 1 to 25 form part of these financial statements.

John C. Corrigan, Chief Executive
National Treasury Management Agency

30 June 2014

National Debt Statement

31 December

			2013		2012
	Note		€ million		€ million
Medium/Long Term Debt	8(a)
Irish Government Bonds listed on the Irish Stock Exchange	8(b)		111,007		87,853
Private Placements			602		602
Medium Term Notes			65		65
European Investment Bank Loans			100		100
EU/IMF Programme Funding	8(c)		66,942		55,898
Other Medium/Long Term Loans			5		5
			178,721		144,523
Short Term Debt
Short Term Paper	9	2,645		2,690
Borrowings from Funds under the Control of the Minister for Finance	17	676		786
			3,321		3,476
State Savings Schemes
Savings Certificates		6,002		4,791
National Solidarity Bonds		1,752		1,001
Savings Bonds		5,342		5,568
Instalment Savings		476		472
Savings Stamps		2		2
Prize Bonds		1,932		1,649
	10		15,506		13,483
			197,548		161,482
Less: Cash and Other Financial Assets	11		(23,601)		(23,850)
National Debt	14		173,947		137,632

Notes 1 to 25 form part of these financial statements.

John C. Corrigan, Chief Executive
National Treasury Management Agency

30 June 2014

National Debt Cash Flow Statement

Year Ended 31 December

			2013	2012
		Note	€000	€000
Movement in Exchequer Balances:
Opening Balance in Exchequer Account		11	15,279,782	13,098,521
Deposits, Treasury Bills and Other Financial Assets		18	(10,597,868)	(3,977,042)
Borrowing Activity (see below)			36,287,560	24,110,031
			40,969,474	33,231,510
Exchequer Deficit			(11,503,359)	(14,891,728)
IBRC Promissory Notes Liability discharged by the Issue of Irish Government Bonds		24	(25,034,000)	(3,060,000)
Closing Balance in Exchequer Account		11	4,432,115	15,279,782
	Receipts1	Payments1	2013 Net	2012 Net
	€000	€000	€000	€000
Borrowing Activity2
Irish Government Bonds listed on the Irish Stock Exchange	39,193,800	(15,820,893)	23,372,907	1,978,842
EIB Loans	–	–	–	100,000
EU/IMF Programme Funding	22,844,050	(11,797,165)	11,046,885	21,235,237
Other Medium/Long Term Loans	–	(126)	(126)	(126)
Commercial Paper	31,941,267	(31,986,292)	(45,025)	(229,565)
Savings Certificates	1,890,460	(679,613)	1,210,847	558,065
Savings Bonds	1,925,299	(2,150,806)	(225,507)	785,354
National Solidarity Bond	794,785	(43,786)	750,999	393,754
Instalment Savings	108,374	(104,115)	4,259	(1,485)
Prize Bonds	476,385	(193,955)	282,430	200,610
Borrowings from Ministerial Funds	58,257,322	(58,367,431)	(110,109)	(910,655)
Total Borrowing Activity	157,431,742	(121,144,182)	36,287,560	24,110,031

¹ Receipts and payments represent the gross value of borrowing activity, including rollover of debt and related hedging transactions.
² Borrowing activity includes €25.03 billion of floating rate Government bonds which were issued to the Central Bank of Ireland following the liquidation of IBRC in exchange for the Promissory Notes previously held by IBRC.

Notes 1 to 25 form part of these financial statements

John C. Corrigan, Chief Executive
National Treasury Management Agency

30 June 2014

Statement of Movement in National Debt

Year Ended 31 December

		2013	2012
	Note	€000	€000
Opening National Debt		137,632,014	119,082,027
Increase in National Debt (nominal)		36,314,637	18,549,987
Closing National Debt		173,946,651	137,632,014
Increase in National Debt (nominal) represented by:
Exchequer Deficit		11,503,359	14,891,728
Settlement of IBRC Promissory Notes Discharged through the issue of Irish Government Bonds	24	25,034,000	3,060,000
Discount on Irish Government Bonds issued in Settlement of Instalment on IBRC Promissory Notes		–	411,550
Net Premium/(Discount) on Bond Issuances and Cancellations		(219,150)	152,987
Medium/Long Term Loans: Net Reduction of Proceeds over Nominal Liability		–	37,700
Effect of Foreign Exchange Rate Movements		(3,433)	(4,023)
Movement in CSRA Current Balance	11	(139)	45
		36,314,637	18,549,987

Notes 1 to 25 form part of these financial statements.

John C. Corrigan, Chief Executive
National Treasury Management Agency

30 June 2014

Notes to the Financial Statements

1. Total Debt Service Cost

		Charged on Foreign Currency Clearing Accounts	Charged on Central Fund	Charged on CSRA	Total Service Cost 2013
	Note	€000	€000	€000	€000
Interest Paid
Medium/Long Term Debt	2	207,027	4,859,426	2,008,758	7,075,211
Short Term Debt	3	1,181	24,064	–	25,245
State Savings Schemes	4,10	–	343,057	6,895	349,952
Other Movements	5	(979,982)	910,478	68,511	(993)
Sinking Fund Payments	6	–	–	624,552	624,552
Fees and Expenses	7(a)	4,608	103,554	(11,699)	96,463
Expenses of the Agency	7(b)	1,200	36,738	–	37,938
Interest Received on Deposits,
Treasury Bills and Short Term Notes		–	(12,026)	(113,178)	(125,204)
Inter Account Movement		–	2,583,978	(2,583,978)	–
Total Debt Service Cost		(765,966)	8,849,269	(139)	8,083,164

 

2. Interest on Medium/Long Term Debt

	2013	2012
	€000	€000
Irish Government Bonds listed on the Irish Stock Exchange	5,128,943	4,074,819
EU/IMF Programme Funding	1,904,968	1,368,581
European Investment Bank Loans	3,665	–
Private Placements	34,693	34,693
Medium Term Notes	2,953	3,760
Other Medium/Long Term Debt	(11)	(40)
	7,075,211	5,481,813

 

3. Interest on Short Term Debt

	2013	2012
	€000	€000
Short Term Paper	25,245	38,881

 

4. Interest on State Savings Schemes

	2013	2012
	€000	€000
Savings Certificates	103,824	72,627
Savings Bonds	187,790	138,383
Instalment Savings	13,460	18,351
Prizes in respect of Prize Bonds	35,160	47,613
National Solidarity Bonds	9,718	6,528
	349,952	283,502

Payments for interest on State Savings Schemes in 2013 include transfers to the Dormant Accounts Fund in respect of accumulated capitalised interest on certain accounts deemed dormant by An Post under the Dormant Accounts Act, 2001. The net interest amounts transferred were as follows:

	2013	2012
	€000	€000
Savings Certificates	906	872
Savings Bonds	515	47
Instalment Savings	224	273
	1,645	1,192

 

5. Other Movements

The Agency, as part of its remit, engages in a range of debt management transactions including derivatives (note 13). This figure includes the effect of net cashflows associated with these activities.

The net fund flows arising on hedging activities that are not linked with specific borrowing transactions are included in debt service costs at the time the funds are received or payment made.

6. Sinking Fund Payments

Section 22 of the Finance Act, 1950 (as amended) provides for specified amounts for the redemption of debt. The sums provided and applied were as follows:

		2013	2012
	Note	€000	€000
Capital Services Redemption Account	15	624,552	645,681

 

7 (a). Fees and Expenses

 

	2013	2012
	€000	€000
EU/IMF Programme Funding	60,793	84,761
Government Bonds and Other Expenses	13,677	1,928
Savings Certificates	9,207	7,610
National Solidarity Bonds	3,032	4,418
Prize Bonds	12,038	10,879
Savings Bonds	10,714	8,755
Instalment Savings	743	1,121
Fee Receipts	(13,741)	(15,470)
	96,463	104,002

 

7 (b). Expenses of the Agency

Expenses incurred by the Agency in the performance of its functions are charged on and paid out of the Central Fund or the growing produce thereof.

8 (a). Medium/Long Term Debt

The residual maturity profile at year-end of the Medium/Long Term Debt, taking into account the treasury management transactions entered into by the Agency, is as follows:

	2013	2012
	€ million	€ million
Debt Due for Repayment within 1 year	3,002	5,143
Debt Due for Repayment between 2 and 5 years	48,909	41,704
Debt Due for Repayment in more than 5 years	126,810	97,676
	178,721	144,523

 

8 (b). Irish Government Bonds listed on the Irish Stock Exchange

	2013	2012
	€ million	€ million
Fixed Rate Bonds	84,586	86,832
Floating Rate Bonds (note 24)	25,034	–
Amortising Bonds	1,387	1,021
	111,007	87,853

 

8 (c). EU/IMF Programme Funding

Ireland’s EU-IMF programme provides for €67.5 billion¹ in external support from the International Monetary Fund (“IMF”), the European Financial Stabilisation Mechanism (“EFSM”) and the European Financial Stability Facility (“EFSF”) and other bilateral loans. The final programme disbursement of €0.80 billion from the EFSM took place in March 2014.

¹ The net euro amount received by the Exchequer was €67.5 billion after adjustment for below par issuance, deduction of a prepaid margin, and the effect of foreign exchange transactions.

The liabilities outstanding under the EU/IMF Programme at end 2013 included in note 8(a) above, taking into account the effect of currency hedging transactions, are as follows:

	2013	Weighted Average Term	2012	Weighted Average Term
	€ million	Years	€ million	Years
Lender
International Monetary Fund	22,528	7.3 Years	19,030	7.3 Years
European Financial Stability Facility	17,881	20.7 Years	12,214	11.7 Years
European Financial Stabilisation Mechanism	21,700	12.4 Years	21,700	12.4 Years
United Kingdom Treasury	3,833	7.5 Years	2,454	7.5 Years
Kingdom of Denmark	400	7.5 Years	200	7.5 Years
Kingdom of Sweden	600	7.5 Years	300	7.5 Years
Total	66,942		55,898

 

The maturity extensions to loans from the EFSF agreed in June 2013 are reflected above. While maturity extensions to loans from the EFSM were also agreed in 2013, the revised maturity dates will only be determined as they approach their original maturity dates. Accordingly the EFSM loan maturity extensions are not reflected above. It is not expected that Ireland will have to refinance any of its EFSM loans before 2027.

The net loan provided by the EFSF of €17,881 million above is net of certain prepaid margins deducted from the initial drawdown in 2011. The total nominal debt due to the EFSF is €18,411 million. €485 million of the prepaid margin of €530 million will be rebated to Ireland along with the related EFSF investment return; the remaining prepaid margin of €45 million is due to the Member State Guarantors, and will be reflected as a debt service cost in future periods.

9. Short Term Paper

The Agency issues short-term paper of maturities of up to one year to raise short-term funds. The proceeds are used to fund the Exchequer deficit and as bridging finance in the replacement of longer term debt, and for other liquidity management purposes. Borrowings may be in a range of currencies, but all non-euro borrowings are immediately swapped back into euro using foreign exchange contracts.

10. State Savings Schemes

Amounts shown in respect of Savings Certificates, Instalment Savings, Savings Bonds and Prize Bonds are net of €9.6 million (2012: €22.0 million) cash balances held by An Post, Permanent TSB and the Prize Bond Company. An Post and the Prize Bond Company act as registrars for the respective schemes.

As these financial statements are prepared on a cash basis, the liabilities do not include the sum of €604 million (2012: €548 million), being the estimate of the amount of accrued interest at 31 December 2013 in respect of Savings Bonds, Savings Certificates and Instalment Savings.

The Small Savings Reserve Fund (“the Fund”) was set up under section 160 of the Finance Act, 1994. In any calendar year if interest payments on encashments of small savings exceed 11 per cent of the total interest accrued on such savings for the previous year, the resources of the Fund may be applied towards meeting those interest costs which exceed 11 percent of that accrued income. The initial amount paid into the Fund has been expended. No moneys were paid into the Fund in 2013 or were held in the Fund at year end.

11. Cash and Other Financial Assets

	Opening Balance at 1 January 2013	Movements during 2013	Closing Balance at 31 December 2013
	€000	€000	€000
Exchequer Account	15,279,782	(10,847,667)	4,432,115
Capital Services Redemption Account (note 15)	360	139	499
Housing Finance Agency Guaranteed Notes	3,982,178	(278,422)	3,703,756
Deposits, Collateralised Deposits and Treasury Bills	4,065,338	10,043,387	14,108,725
CSA Collateral Funding (note 13)	522,743	832,897	1,355,640
	23,850,401	(249,666)	23,600,735

Deposits, Collateralised Deposits and Treasury Bills are made up of Deposits with commercial banks of €3.679 billion (2012: €2.680 billion), Collateralised Deposits of €7.389 billion (2012: €0.339 billion) and Treasury Bills of €3.041 billion (2012: €1.046 billion).

The Housing Finance Agency Guaranteed Notes may not be readily realisable dependent on market conditions.

CSA Collateral Funding arises from the requirement to post cash collateral under Credit Support Annexes associated with certain derivative transactions. These balances, and access to the related cash collateral, change on a daily basis and are dependent on the market value of these derivatives.

12. Risk Management

The Agency’s responsibility for both the issuance of new debt and the repayment of maturing debt, together with the management of the interest rate and currency profile of the total debt portfolio, makes the management of risk a central and critical element of the Agency’s business. The principal categories of risk arising from the Agency’s activities are liquidity, market, counterparty credit and operational risk. In all of these areas the Agency has policies and procedures to measure and control the risk involved.

A key objective of the Agency is to ensure that the Exchequer has sufficient cash to meet all obligations as they fall due. Ensuring the Exchequer has sufficient liquidity is the Agency’s most critical task. Liquidity risks related to the National Debt can arise either from domestic events or, given the high level of linkage between markets, from events outside Ireland. The Agency manages this risk primarily by controlling the amount of liabilities maturing in any particular period of time and matching the timing and volume of funding. This is reinforced by the Agency’s activities in continuing to enhance a well informed and diversified international investor base, through maintaining its presence in all major capital markets and by extending the range of debt instruments which can be issued.

On 28 November 2010, the Government agreed to a three year €85 billion financial support programme for Ireland from members of the EU and the IMF. The external contribution to the programme amounted to €67.5 billion. The terms of the programme include loans of varying maturities. The staggered maturities are important from a risk management perspective so as to avoid a situation whereby Ireland is faced with a large “funding cliff” in any one particular year. The Agency sought to ensure that disbursements under the EU/IMF programme were scheduled in such a way as to provide adequate liquidity while optimising the costs to the State. The programme officially concluded in December 2013 with the final disbursement of funding in March 2014.

Market risk is the risk that movements in market interest or exchange rates or other prices adversely impact on debt service costs or the total market value of the debt. The Agency must have regard both to the short-term and long-term implications of its transactions given its task of controlling not only the immediate fiscal debt service costs but also the present value of all future payments of principal and interest. The exposure to interest rate and currency risk is controlled by managing the interest rate and currency composition of the portfolio in accordance with Ministerial guidelines. Specific quantitative limits are in place to control market risk; exposures against these limits are reported regularly both to portfolio managers and to senior management. As conditions in financial markets change, the appropriate interest rate and currency profile of the portfolio is reassessed. The Agency seeks to achieve the best trade-off between cost and risk over time and has in place a hedging programme to manage interest rate and exchange rate risks and to protect the Exchequer from potential volatility in future years. More information on the use of derivatives is set out in Derivatives (note 13).

Counterparty credit risk arises from derivatives, deposits and foreign exchange transactions. The level of credit risk is minimised by dealing only with counterparties of high credit standing. Procedures provide for the approval of risk limits for all counterparties and exposures are reported daily to management. A review of all limits is undertaken periodically to take account of changes in the credit standing of counterparties or economic and political events. In order to mitigate the Exchequer’s exposure to market counterparties while at the same time ensuring that Ireland has efficient market access for its hedging activities, the Agency may enter into credit support arrangements with the market participants with which it wishes to trade – this involves the receipt and posting of collateral to offset the market value of exposures. More information on the use of credit support arrangements is set out in Derivatives (note 13).

Controls have been established to ensure that operational risks are managed in a prudent manner. These controls include the segregation of duties between dealing, processing, payments and reporting.

13. Derivatives

As part of its risk management strategy the Agency uses a combination of derivatives including interest rate swaps, currency swaps and foreign exchange contracts. The following table shows the nominal value, and present value, of the instruments related to the National Debt outstanding at year end. The present value of each instrument is determined by using an appropriate rate of interest to discount all its future cashflows to their present value.

	31 December 2013		31 December 2012
	Nominal € million	Present Value € million	Nominal € million	Present Value € million
Interest Rate Swaps	28,909	(923)	12,844	(1,328)
Currency Swaps & Foreign Exchange Contracts	18,225	(750)	14,990	329
	47,134	(1,673)	27,834	(999)

The Agency provides treasury services to the National Asset Management Agency (“NAMA”) under section 52 of the National Asset Management Agency Act, 2009. Accordingly it may enter into derivative transactions with NAMA. Any such transactions are offset by matching transactions with market counterparties. As a result there is no net effect on the National Debt accounts. The nominal value of interest rate swaps transacted with NAMA outstanding at end 2013 was €23.5 billion (2012: €19.4 billion); the nominal value of currency swaps and foreign exchange rate contracts transacted with NAMA outstanding at end 2013 was €5.6 billion (2012: €6.2 billion).

In order to mitigate the risks arising from derivative transactions, the Agency enters into credit support arrangements with its market counterparties. Derivative contracts are drawn up in accordance with Master Agreements of the International Swaps and Derivatives Association (“ISDA”). A Credit Support Annex (“CSA”) is a legal document which may be attached to an ISDA Master Agreement to regulate credit support (in this case, cash collateral) for derivative transactions and it defines the circumstances under which counterparties are required to post collateral. Under the CSAs, the posting of cash constitutes an outright transfer of ownership.  However, the transfer is subject to an obligation to return equivalent collateral in line with changes in market values or under certain circumstances such as a Termination Event or an Event of Default.  The provider of collateral is entitled to deposit interest on cash balances posted.

The Agency established a Credit Support Account in the Central Bank of Ireland in 2010 to facilitate these transactions. Derivative contracts are valued daily. When collateral is required from a counterparty it is paid into the Credit Support Account. When the Agency is required to post collateral with a counterparty, it uses the funds in the Credit Support Account to fund the collateral payment. If there are insufficient funds in the Credit Support Account, the Account is funded from the Exchequer.

Credit Support Account	2013 € million	2012 € million
Balance at 1 January	–	–
Margin transfers received from counterparties	5,702	4,353
Margin transfers paid to counterparties	(6,535)	(4,161)
Net Exchequer funding during the year	833	(192)
Balance at 31 December	NIL	NIL
	2013 € million	2012 € million
Note:
Exchequer Funding at 31 December	1,356	523
Net Collateral Posted to counterparties at 31 December	(1,356)	(523)

 

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.

14. National Debt – Currency Composition

The Agency hedges the foreign currency risk of the National Debt through the use of forward foreign exchange contracts and currency swaps. The currency composition of the National Debt, and related currency hedges, are as follows:

	As at 31 December
Currency	2013 € million	2012 € million
Debt Instruments
Euro	155,722	122,940
US Dollar	9,323	8,345
Pounds Sterling	6,462	4,717
Japanese Yen	1,697	1,843
Swiss Franc	24	81
	173,228	137,926
Foreign Currency & Swap Contracts
Euro	18,225	14,693
US Dollar	(9,323)	(8,335)
Pounds Sterling	(6,462)	(4,721)
Japanese Yen	(1,697)	(1,850)
Swiss Franc	(24)	(81)
	719	(294)
National Debt1	173,947	137,632

¹ This figure is net of cash and other financial assets as at 31 December 2013 of €23,601 million (31 December 2012: €23,850 million).

15. Capital Services Redemption Account

This account is used to record:

1. payments of interest and principal out of an annual annuity designed to amortise borrowing for voted capital under section 22 of the Finance Act, 1950 (as amended);
2. certain receipts and payments arising out of debt servicing and debt management transactions authorised by section 67(8) of the Finance Act, 1988 and section 54(7) of the Finance Act, 1970 (as amended).

16. Foreign Currency Clearing Accounts

			2013
	Note	€000	€000
Balance at 1 January 2013			NIL
Amounts Received under Finance Act, 1988 [section 67 (8)]		26,797,890
Amounts Paid under Finance Act, 1970 [section 54 (7)]		(25,817,908)	979,982
Foreign Currency Borrowing Receipts		7,922,195
Foreign Currency Borrowing Payments		(8,688,161)	(765,966)
Interest Paid on Foreign Currency Borrowings	1
Medium/Long Term Debt		(207,027)
Short Term Debt		(1,181)	(208,208)
Expenses of Foreign Currency Borrowings			(4,608)
Expenses of the Agency			(1,200)
Balance at 31 December 2013			NIL

 

17. Borrowings from Funds under the Control of the Minister for Finance

These funds are short term borrowings of the Exchequer drawn down as a “ways and means” of funding Exchequer requirements from a number of funds under the control of the Minister for Finance.

	2013	2012
	€ million	€ million
Post Office Savings Bank Fund	471	624
Deposit Monies Investment Account (note 22)	205	162
	676	786

 

18. Deposits, Treasury Bills and Other Financial Assets

The Agency places short-term investments in Deposits, Collateralised Deposits and Treasury Bills for maturities of up to one year for the purpose of liquidity management.

19. National Loans Advance Interest Account

The Agency from time to time issues or cancels amounts of existing Irish Government Bonds. This occurs by means of sales or purchases by the Post Office Savings Bank Fund (POSBF) which in turn settles with the Exchequer. The settlement amount for each bond transaction includes the accrued interest at that point in the coupon period.

A full dividend is payable to the registered owner in cases where the bond is held to the ex-dividend date. The accrued interest paid is stored in the National Loans Advance Interest Account until the full dividend is due on the coupon date. The purpose of the account is for the POSBF to then compensate the Exchequer for the unearned element of the dividend paid on the coupon date arising on tranching bonds cum-dividend or on cancelling bonds ex-dividend. Upon coupon date, these amounts are then used to offset the related servicing costs of the Exchequer.

	2013	2012
	€000	€000
Account of Receipts and Payments
Balance at 1 January	12,179	11,924
Accrued interest received on National Loans
– Tranches and Auctions	42,038	65,242
Accrued interest paid on National Loans	(48,873)	(64,987)
Balance at 31 December – Cash with Central Bank of Ireland	5,344	12,179

 

20. National Loans (Winding Up) Account

When a National Loan is due for redemption, the full amount outstanding is payable to the loan holders. Any amount not claimed by the loan holder at the redemption date is transferred into this account by a payment from the Exchequer. Any future claims which are made in relation to these loans are therefore met from this account. This account also includes balances which were held by the Central Bank and the Department of Finance as Paying Agents in respect of uncashed redemption payments and were transferred to the Agency.

	2013	2012
	€000	€000
Account of Receipts and Payments
Balance at 1 January	3,455	3,363
Receipts from Exchequer	198	1,193
Receipts from Central Bank Suspense Account	102	69
Payments to Central Bank Suspense Account	(70)	(138)
Payments for Redemption of National Loans	(596)	(1,032)
Balance at 31 December – Cash with Central Bank of Ireland	3,089	3,455

 

	2013	2012
	€000	€000
National Loans Redeemed during the Year Ended
National Bonds 1966-77	1	–
5.25% Nat Dev Loan 1979-84	–	1
9% Conversion Stock 1980-82	1	–
6% Exchequer Stock 1980-85	–	1
7.5% National Loan 1981-86	4	–
5.75% National Loan 1982-87	1	–
5.75% Exchequer Stock 1984-89	9	1
9.75% National Loan 1984-89	3	–
6% Exchequer Loan 1985-90	7	–
14% Exchequer Loan 1985-90	2	–
6.75% National Loan 1986-91	2	–
7% National Loan 1987-92	11	–
15% Conversion Stock 1988	1	–
11.5% Exchequer Stock 1990	3	–
11% National Loan 1993-98	1	–
13% Exchequer Stock 1994	1	–
7.75% Capital Stock 1997	–	5
6.5% Exchequer Stock 2000-05	42	–
8.25% Capital Stock 2008	–	5
6% Treasury Stock 2008	–	39
8.5% Capital Stock 2010	38	68
8.75% Capital Stock 2012	271	912
5% Treasury Bond 2013	198	–
	596	1,032

 

21. National Treasury Management Agency (Unclaimed Dividends) Account

When a dividend payment is due on a bond, the full amount due is paid by the Agency to the Paying Agent which then issues to the registered holders. The balance on the unclaimed dividends account represents dividends on matured loans, which have not been claimed by the registered holders and have been returned to the Agency by the Paying Agent. The balance is available to cover future claims on these dividends. The Paying Agent maintains a cash float, on behalf of the Agency, which it uses to service claims as they arise during the year.

	2013	2012
Account of Receipts and Payments	€000	€000
Balance at 1 January	2,556	2,610
Payment of Unclaimed Dividends	(28)	(54)
Balance at 31 December – Cash with Central Bank of Ireland	2,528	2,556
	2013	2012
Dividends Claimed and Paid in Year	€000	€000
Irish Government Bonds Registered with Central Bank of Ireland	28	47
Foreign Bonds Administered by Paying Agent	–	7
Balance at 31 December – Cash with Central Bank of Ireland	28	54

 

22. Deposit Monies Investment Account

This account records the borrowings and repayments of surplus funds held in the Supply Account of the Paymaster General.

	2013	2012
Account of Receipts and Payments	€000	€000
Balance at 1 January	162,082	256,383
Ways and Means Advances Paid to Exchequer	6,763,310	6,527,704
Ways and Means Advances Repaid by Exchequer	(6,720,417)	(6,622,005)
Balance at 31 December – Ways and Means Advances to Exchequer	204,975	162,082

 

23. Account of Stock Accepted in Payment of Inheritance Tax and Death Duties

No stock was accepted in payment of inheritance tax and death duties during 2013.

24. Settlement of IBRC Promissory Notes

2013
Following the legislation placing Irish Bank Resolution Corporation (“IBRC”) into special liquidation on 7 February 2013, and the agreement between the Irish Government and the Central Bank of Ireland (“CBI”) to replace the promissory notes provided to State-owned IBRC with long-term Government Bonds, the promissory notes were cancelled and replaced with eight new Floating Rate Treasury Bonds. A total amount of €25.03 billion was issued on 8 February 2013 to the CBI with maturities ranging from 25 to 40 years. The bonds will pay interest every six months (June and December) based on the 6-month Euribor interest rate plus a fixed margin which averages 2.63 percentage points across the eight issues. The Agency has entered into short-term interest rate derivative trades to hedge an element of the exposure to interest rate movements. Further information is included within Note 13 – Derivatives.

2012
In 2010, the Minister for Finance issued promissory notes to Anglo Irish Bank Corporation Limited (subsequently Irish Bank Resolution Corporation Limited (“IBRC”)). An instalment of €3.06 billion was due for payment by the Minister to IBRC on 31 March 2012. IBRC agreed to accept the Government bonds issued by the Agency on behalf of the Minister equivalent in value to the cash due in settlement of the instalment and entered into a bond subscription agreement with the Agency. Under a Set Off Deed dated 30 March 2012, the Minister, IBRC and the Agency agreed that the proceeds of the bond sale to IBRC were to be netted against the instalment payment due to IBRC under the promissory notes. As a result no cash transactions occurred on the Exchequer account. However, as the effect was to increase the National Debt, the Agency accounted for the sale of the bonds in accordance with the standard treatment of a bond issue.

25. Events since the Balance Sheet Date

In May 2014, the Government published the National Treasury Management Agency (Amendment) Bill. The Bill will, when enacted, streamline and simplify the Agency’s governance structures to enable a more integrated approach to the performance of its functions. The Agency will be reconstituted as a body with a Chairperson and eight other members who will have over-arching responsibility for all of the Agency’s functions (excluding NAMA which will continue to have its own separate board). The National Development Finance Agency Board, the Agency Advisory Committee, National Pensions Reserve Fund Commission and State Claims Policy Committee will be dissolved.

There is no impact on the carrying values of the National Debt.