The UK Municipal Bonds Agency plc is owned by local authorities for local authorities. This page sets out some high-level information for local authorities and provides links to more detailed information and materials.
The Local Government Association considered the establishment of an agency to reduce the cost of councils’ debt financing at some length. An outline business case was prepared in 2011-12 and following a brief review in October 2013 the decision was taken to update the business case. This was published as the Revised Business Case in March 2014 and led to the establishment of what was to become the UK Municipal Bonds Agency plc.
The Revised Business Case set out a clear rationale for the establishment of a bonds agency, noting there was ample evidence from Scandinavia, Japan and New Zealand that a bonds agency would deliver ample benefits to local authorities, not least reduced borrowing costs. Most importantly, the Revised Business Case established a clear justification for a bonds agency on public interest grounds, primarily that it would:
A copy can be downloaded here.
In 2019, the guarantee arrangements set out in the Revised Business Case were amended so that the liability of local authorities borrowing through the UK Municipal Bonds Agency’s pooled loan programme would be proportional to their borrowings rather than joint and several.
With the success of the UK Municipal Bonds Agency’s inaugural bond on behalf of Lancashire County Council and frequent changes to the PWLB’s terms and conditions, the key tenets of the Revised Business Case have been validated. More on the UK Municipal Bonds Agency’s business case can be found here.
The UK Municipal Bonds Agency borrows money, primarily in the capital markets, to lend to local authorities. The UK Municipal Bonds Agency is not a bank and will only borrow to fund loans it has already agreed to provide.
The UK Municipal Bonds Agency has three lending programmes:
Except for standalone loans, local authorities do not need to obtain a credit rating from one of the three major credit rating agencies, Moody’s, Standard & Poor’s or Fitch.
The majority of loans provided by the UK Municipal Bonds Agency are expected to be pooled and guaranteed collectively by borrowers. The guarantee is proportional and several:
No UK local authority has ever defaulted on a loan.
More information on how the UK Municipal Bonds Agency works can be found here.
Any local authority wishing to borrow for the medium-term and long-term through the UK Municipal Bonds Agency is required to enter into the UK Municipal Bonds Agency’s Framework Agreement. This legal document forms a contract between each local authority and the UK Municipal Bonds Agency. The Framework Agreement sets outs the terms and conditions of the UK Municipal Bonds Agency’s loans and the terms of the proportional guarantee. More details can be found here.
Other documents available to assist local authorities to understand and approve the Framework Agreement include report templates and a plain English guide to the UK Municipal Bonds Agency. These can be found by clicking on “Key documents” heading above.
When a local authority signs the new version of the Framework Agreement, the name of the authority and a download link will be provided below. A local authority who has signed the Framework Agreement may not have borrowed through the UK Municipal Bonds Agency and may not intend to do so upon signing. The UK Municipal Bonds Agency is not obliged to lend to any local authority that has entered into the Framework Agreement.
Downloadable copies are provided solely for local authorities and no other party. A local authority downloading copies of an agreement should contact the UK Municipal Bonds Agency for the relevant password. Contact details are available here.
Please note that to provide additional security, signature pages for the relevant sections are held by the UK Municipal Bonds Agency’s legal advisors and are not available for download. A single signature page is attached to each copy of the Framework Agreement with certain details redacted.
The UK Municipal Bonds Agency has an extremely conservative approach to risk management. The Governance, Risk and Compliance Framework, together with the detailed policies and procedures that flow from that framework, set out the UK Municipal Bonds Agency’s strategy, processes and practices to ensure that its:
The credit process is an integral part of the proportionally guaranteed loan programme and core to the UK Municipal Bonds Agency’s risk management. The process is built upon the methodologies used by the leading credit rating agencies Moody’s, Standard & Poor’s and Fitch. It is used to ensure that local authorities whose finances are significantly less sound than their peers, or whose business model is risky compared to their peers, cannot borrow under the proportional guarantee. More on the credit process can be found here.
As the UK Municipal Bonds Agency issues bonds, it will publish reports setting out details of the loans it has made to local authorities. These will be posted onto the page that can be reached by clicking on “Loan reports” above.
To date, one loan has been made to Lancashire County Council, which is a standalone loan outside of the proportional guarantee. The loan is for £350 million for 5-years maturing March 2025. The loan is floating rate and linked to SONIA at a spread of 80bps.