NSW Government responds to subprime investment
The NSW Government has issued a revised order to guide local council investment practices following a review that found some councils investments were linked to the sub-prime mortgage market.
The Government commissioned the Cole Report to address concerns about council investments in financial products – known as collaterised debt obligations or CDOs – that were linked to the US sub-prime mortgage market
After surveying the State’s 152 councils, the Cole Report found losses represented 3.5 percent of all local government investments.
While the report doesn’t specify details of those hit the hardest, The Age reported on Saturday that a leaked document revealed NSW and Western Australia are the states worst affected.
The article also reported that Gosford Council has a $74 million portfolio of CDOs and similar finance products, Newcastle Council has a $39 million portfolio, Coffs Harbour a $39 million portfolio and Sutherland $55 million.
The NSW Government’s revised ministerial order, based on Cole Report recommendations made public in April, include:
• Tightening permissible investment products and clarifying some existing definitions;
• Barring the manufacturers and distributors of investment products from acting as investment advisors to councils;
• Suspending investments with specific credit ratings until December 2009
• Ensuring councils are more fully aware of their obligations under the Local Government Act 1993 and the NSW Trustee Act 1925
• Issuing an investment policy guideline for councils in addition to the existing framework
To view the Cole report Review of Local Government Investments click here.
To view the article in The Age click here.
[Tue 19/08/2008 01:27:40]
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