Memorandum of the expert working group assessing development needs in central government debt management

Abstract

The amount of central government debt has doubled since the financial crisis, at a time when there has also been a doubling of the government’s contingent financial liabilities. The euro-denominated risks associated with government debt servicing have therefore also grown. The operating environment within which debt management is performed has changed as well. Financial market regulation has become more stringent, and more attention has been focused on the governance of financial institutions. Money market interest rates have fallen to zero or below, and a significant proportion of the central government debt of countries in the euro area has been transferred to central bank balance sheets through monetary policy purchases. The rapid development and heightened vulnerability of computer systems, including cyber security threats, have brought greater operating risks to debt management.

The organisation of government debt management as part of the multi-sectoral State Treasury’s work is problematic. Debt management is directed from the ministry through two channels, and ICT decisions concerning debt management are made at multiple levels. The supervision and administration of debt management do not in all respects follow the criteria used in the financial sector.

For these reasons the working group recommends that debt management and the management of government transactions be transferred to a separate debt office that would function as a government agency or as a separate unit within the Ministry of Finance. Management would then be performed through a single channel.