Report & Financial Statements for the Year ended 31st December ...

FUNDING & DEBT MANAGEMENT
European Central Bank Liquidity
Management
The European Central Bank (ECB) operates a liquidity
management system which depends in part on the
accurate forecasting of the level of government balances
in the national central banks throughout the euro area.
In the case of Ireland, the forecast level of balances for
each day is reported to the ECB by the Central Bank and
Financial Services Authority of Ireland six business days
ahead. The balances are determined by Government
spending, tax collected by the Revenue Commissioners
and the NTMA’s debt management operations. At
the end of each business day, these transactions are
tabulated by the NTMA and the effect on liquidity is
calculated in order to ensure that government balances
are maintained at the level of the forecast given to the
ECB by the Central Bank and Financial Services Authority
of Ireland. The NTMA raises funds or places deposits in
the international money markets in order to maintain the
balances at the level of the forecast given to the ECB.
These operations during 2004 amounted to €221.5
billion, with an average transaction size of €476 million.
Deposit Placements
The NTMA has in place a comprehensive system for
monitoring its credit risk with other financial institutions.
This has involved an assessment of the financial strength
of over 100 banks and other bodies to determine the
amount of funds which the NTMA is prepared to place
with each, both on a short and long term basis. These
counterparty credit limits are constantly reassessed and
the NTMA’s exposure is monitored on a daily basis. The
need for this arises because the NTMA must always have
liquidity placed in the international markets to meet its
cash requirements as they arise while ensuring that the
funds are properly safeguarded. Typically, the amount
of funds on deposit ranges from €2 billion to €3 billion
each day.
Transactions on behalf of the National
Pensions Reserve Fund Commission
The Commissioners of the National Pension Reserve
Fund (NPRF) have mandated the NTMA to manage a
passive bond portfolio which was valued at €1,148
million at end 2004. In addition, the NTMA executes FX
transactions to hedge the foreign exchange exposure
on certain of the NPRF’s non-euro investments. The
FX transactions amounted to €17 billion in 2004. The
NTMA is also mandated to manage the uninvested cash
balances of the NPRF. The average balance in 2004
was €1.1 billion.
Report and Accounts for the year ended 31 December 2004
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