Guaranteeing financial continuity: mintaining a credit balance on the State’s single account every day.
Performance
AFT ensured the financial continuity of the French State as the COVID-19 crisis persisted. The day-to-day balance on the State’s single account remained in credit and the transactions made through the account were completed properly. For this purpose, AFT produces successive 12-month cash and debt forecasts.
Managing the State's cash holdings is a core part of AFT's mission
The State’s cash holdings are centralised in a single account with the Banque de France. The single account records all of the financial transactions made by more than 4,000 government accountants on nearly 3,000 transaction accounts. It aggregates transactions under the State budget, the transactions of Treasury correspondents, meaning other entities that deposit their funds in the Treasury Account (primarily local authorities and government-funded institutions), and AFT’s transactions (redemption of bonds at maturity, interest payments, investments, margin calls, etc.).
AFT ensures that the State’s cash position is always adequate to settle the financial transactions posted to the Treasury Account under the most secure conditions. For this purpose, AFT monitors the execution of revenue and expenditure flows on the Treasury Account with the Banque de France in real time. The average daily volume of cash flowing in and out of the account came to €19bn in 2021.
Cash management continued as the pandemic persisted.
A justified resurgence of concerns in the first half of the year led to prospects of an increase in expenditure and a decrease in revenue, which would mean more borrowing on the market to finance the fiscal deficit. AFT periodically adjusted its forecasts of flows on the Treasury Account. It participated in framing two Supplementary Budget Acts, since it is AFT’s responsibility to compile the State’s cash flow statement, which balances the sources and applications of funds, and debt service. It is also tasked with translating Parliament’s decisions into cash flows, with the help of the administrations concerned.
TREASURY ACCOUNT CREDITS AND DEBITS IN 2021
The pandemic continued to affect proactive cash management.
AFT’s management of cash holdings relies on daily forecasts to assess the amounts needed to cover upcoming transactions. AFT provides proactive management of the State’s cash resources to ensure sound stewardship of public monies. Temporary cash surpluses may be invested in interbank market transactions, with due consideration of counterparty risk. These transactions take the form of unsecured deposits or repurchase agreements involving government securities. The daily amount invested averaged approximately €6bn over the year.
In December, AFT was able to test its reserve of securities that are useable as collateral for accessing cash on the repo market.
This responsive and secure facility enjoys a deep market. It supplements the other short-term cash management instruments, which are Treasury bills and cash lines of credit granted by banks. The increased borrowing requirements in the second quarter of 2020 demonstrated the utility of diversified funding sources for the State. Repos, or repurchase agreements, are transactions by which cash is borrowed in exchange for an equivalent amount of securities provided as collateral. These are one of the main tools for short-term borrowing on the money market. The lender has the option of reselling the securities received as collateral, and the securities can also be used as collateral for central bank refinancing. The test of this tool in December 2021 was successful.
Treasury correspondents’ deposits continue to contribute to financing ressources
Entities that are required1 or authorised to deposit their cash holdings on the Treasury Account are called Treasury correspondents. Transactions made on Treasury correspondents’ accounts have a direct impact on the Treasury Account. AFT oversees daily reporting of advance notifications of cash transactions from Treasury correspondents, which enables it to determine the settlement dates and amounts of transaction flows posted to the Treasury Account as accurately as possible. More specifically, local authorities and government-funded institutions are required to notify AFT of any financial transaction amounting to more than €1m by 4pm on the previous day. In 2021, the percentage of such transactions notified in advance stood at 99.3% for local authorities and government-funded institutions. These results are slightly better than the performance target set out in the Budget Act.
The obligation to deposit funds on the Treasury Account was extended in 2021 to include some entities that had previously been exempted for historical reasons. Order 2020-1496 and Implementing Decree 2021-29 of 14 January 2021 make it possible to pool the funds of new public and private entities providing public services in the Treasury Account, thereby contributing to financing resources.
1 Under the terms of the decree on government budget and accounting management of 7 November 2012, most public sector entities are required to deposit their funds with the Treasury. This requirement applies in particular to local authori¬ties, government-funded institutions and hospitals. The Decree came into force on 30 June 2014.