Managing cash flows
All of the State’s cash flows (expenditure and receipts), along with those of local and regional authorities and government-funded institutions (known as “Treasury correspondents”), are centralised in a single account with the Banque de France. Agence France Trésor is responsible for the day-to-day management of this account.
Ensuring the continuity of state finances, in accordance with France’s European commitments
Agence France Trésor is responsible for managing the Government’s cash holdings. This means ensuring that the Government has the financial resources necessary to meet its commitments at all times, regardless of the circumstances.
Article 123 of the Treaty on the Functioning of the European Union (TFEU) prohibits the Banque de France, which holds the State’s account, from granting the State overdrafts. This means that the Treasury Account must show a credit balance at the end of each day.
Cash management that meets the highest international standards
France has gradually introduced a pooling arrangement called “centralisation” to optimise public cash management. This involves channelling most public financial flows through the single Treasury Account. Centralisation of public cash holdings is a best practice recommended by international institutions, including the World Bank and the IMF.
In addition to the State, the vast majority of French public sector entities, including local authorities, local and national government- funded institutions, and hospitals, are required to deposit their cash holdings with the Treasury. Other entities also deposit some or all of their cash with the Treasury under the terms of agreements, the European Union in particular, which deposits some of its funds with the French Treasury. All the entities that deposit their cash with the Treasury are called “Treasury correspondents”.
Treasury correspondents’ deposits are a cash resource for the State. They enable the State to reduce its reliance on market financing.
Promoting centralisation of public sector cash holdings
Centralisation prevents situations where some entities post a financing requirement while others post a cash surplus, thereby reducing recourse to market financing by government departments. This has a favourable impact on the yields France obtains on the market and reduces the State’s reliance on market financing. It provides absolute security for Treasury correspondents’ deposits.
Using cash holdings in the taxpayers’ best interest
AFT optimises the cost of cash holdings for taxpayers by ensuring that an appropriate cash balance, including a safety cushion, is on hand to meet expected expenditures.
For that purpose, AFT constantly updates its cash flow forecasts for the next 12 months. At the end of each day, it also forecasts the cash flows for the next day. All day long, AFT monitors expenditure and revenue in real time.
Centralisation of public cash holdings enables AFT to oversee both the State’s financial flows and those arising from the financial activities of Treasury correspondents. It relies on a dedicated information system for that purpose that identifies each flow.
The cash management strategy, aimed at ensuring optimum security for the settlement of the State’s financial commitments and those of the Treasury correspondents, generally results in a surplus on the Treasury Account. AFT invests this cash on the interbank market every day to reduce the cost of the cash surplus. These investments may take the form of loans or securities repurchase agreements. AFT may offer investments to its counterparties several times a day, depending on market demand.