Risk management and control

As part of its tasks, Agence France Trésor must:

  • define and establish a monitoring framework and procedures for the French government’s financial transactions
  • manage the risks incurred in financial transactions, such as interest rate risk, counterparty risk, liquidity risk, operational and data processing risk, and market risk
  • ensure administrative monitoring of financial transactions
  • ensure proper settlement of transactions on the Treasury Account held at the Banque de France (back-office processing)

Risk control is a cross-cutting activity that applies to all of the Agency's operations.

Compliance with market practices

The French government is not a financial institution, but Agence France Trésor, which acts as both a lender and cash manager, is like a financial institution because of its activities, its risk exposure and its business areas. Therefore, the provisions of the Order of 3 November 2014 on internal control in banking sector undertakings (French only, no English version) are applicable, with the necessary adjustments.

Four principles have proven to be critical:

  • constant monitoring within each operational unit and periodic second-level audits of the effectiveness of this monitoring
  • separation of functions (particularly, between initiation, validation and monitoring of the risks incurred in transactions)
  • definition of internal risk limits
  • compliance with the audit trail (reconstitution of transactions and the relevant flows in chronological order)

Consequently, Agence France Trésor has designed and periodically updated a general activity framework that sets out the applicable standards for management, organisation and internal control. The Director General of the Treasury, who chairs Agence France Trésor, has approved this framework. A specific code of practice, which draws inspiration from the laws and regulations governing the financial sector, has been developed for Agence France Trésor personnel.