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, maintaining the day-to-day balance of the State's single account in credit, ’ensuring proper execution of transactions on the account and producing 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 financial transactions executed by government accountants on roughly 3,000 transaction accounts. It aggregates transactions under the State budget, the transactions of Treasury correspondents, namely 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.).
Whereas the balance of the State's account in the books of Banque de France must be in credit every evening, this obligation must be met while also preserving taxpayers' financial interests. Cash left on deposit in the State's single account with the Banque de France bears interest at contractual rates. Up to mid-2014, these rates were essentially lower than the State's investment rates on the interbank market, the benchmark criterion of which was the Eonia1 rate, and it was in the interests of taxpayers to try and limit available funds on the single account with the Banque de France by placing as much cash as possible on the interbank market. Interest rate trends and the abundance of liquidity on the money market since mid-2014 have often meant that more interest is earned on the single account with the Banque de France than the interest offered on the Interbank market (even though it was at times negative), as a result of which there was much more cash on the said account at the day's end.
In 2022, interest on the Banque de France account was negative for most of the year. When the
€STR2 became positive again in September, and in order to safeguard transmission of monetary policy, a 0% ceiling on interest paid on the State's accounts was temporarily suspended by an ECB decision in September 2022. The Banque de France account thus earned positive interest at the end of 2022, at the €STR rate.
In 2022, average daily inbound and outbound cash flows totalled
€19.7bn.
TREASURY ACCOUNT CREDITS AND DEBITS IN 2022
AFT prepared the resumption of proactive cash management against a backdrop of rising interest rates.
AFT’s management of cash holdings relies on daily forecasts to assess the amounts needed to cover forthcoming transactions. Temporary cash surpluses may be invested in interbank market transactions, with due consideration of counterparty risk. These trans- actions take the form of unsecured deposits (with no guarantee) or repurchase agreements involving government securities (guaranteed loans backed by collateral security). The daily invested amount averaged approximately €6.7bn in 2022. With interbank rates back in positive territory and the prospect ’an end to yield, temporary, on the Treasury's account, AFT prepared itself in 2022 for a significant increase in these transactions in the years to come.
AFT also has a reserve of securities that are usable 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 include Treasury bills and cash lines of credit granted by banks.
Treasury correspondents’ deposits continue to contribute to financing resources.
Entities that are required3 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 4 p.m. on the previous day. In 2022, the percentage of such transactions notified in advance stood at 99.1% for local authorities and government- funded institutions. These results are better than the performance target set out in the Budget Act.
1 Former day-to-day interbank market rate
2Current day-to-day interbank market rate
3Under 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.