INTOSAI Working Group on INTOSAI Working Group on Public Debt - guidelines Public Debt - guidelines for risk management of for risk management of public debt and assetspublic debt and assets

INTOSAI

S. 2

INTOSAI

DI. Mauser, Austrian Court of Audit

Debt management

- Sufficient financial skills as an absolute necessity

- Optimizing of debt portfolio: fixed interest, variable interest

- use of other currencies only when clear advantages of interest payment; daily monitoring of curreny risks with clear limits

S. 3

INTOSAI

DI. Mauser, Austrian Court of Audit

Derivatives (Swaps, futures, ...)

- use only to optimize the structure of the portfolio (for example the proportion of fixed to variable interest payments)

- Do not use more volume of (netted) derivatives than you have debt

- use only standardized products

- measure the risk (for example with use of Value at Risk-Models)

S. 4

INTOSAI

DI. Mauser, Austrian Court of Audit

Risk Management

- use appropriate methods to limit and control financial risks (for example Value at Risk, Cashflow at Risk, Modified Duration)

- establish a system of limits for maximum debt, maximum volume of swaps, maximum Value at Risk, ...

- establish monthly reports

- Be cautious with financial instruments with complex structures

S. 5

INTOSAI

DI. Mauser, Austrian Court of Audit

Asset Management

- Make clear which asset classes can be used and which not

- Take care that sufficient diversification is achieved

- Measure the performance of the portfolio at least once a year

- Check the achieved performance with an appropriate benchmark

- The portfolio with the lowest standard deviation for a given return is recognised as the most diversified