What we do

Objective and Goals

The primary objective of the UK Municipal Bonds Agency is to reduce the debt financing costs of UK local authorities to save them money.  To do this, the UKMBA borrows money, primarily by issuing bonds in the capital markets that are bought by pension funds and insurance companies, and lends that money to UK local authorities.

The other goals of the UKMBA are to:

  • Protect councils from changes to the Public Works Loan Board’s terms and conditions
  • Diversify the funding sources available to local authorities
  • Provide fully transparent financing to local authorities
  • Tailor products to suit local authorities’ needs
  • Reduce risky and excessive borrowing by local authorities
  • Generate economies of scale

Long-term and Medium-term Loans

The UK Municipal Bonds Agency plc maintains two loan programmes that offer medium-term and long-term loans to local authorities:

  • Proportionally guaranteed, pooled loans of £1 million or more, for maturities greater than one year.  These loans are funded by matching bond issues, with a number of loans to different local authorities funded through each bond issue.
  • Standalone loans to a single local authority for £250 million or more for maturities of one year or greater.  These loans are outside of the proportional guarantee and are funded by a bond issue that is guaranteed by the solely borrower.  The borrower must obtain an external credit rating from one or more of the major credit rating agencies, Moody’s, Standard & Poor’s or Fitch.

The UK Municipal Bonds Agency has entered into a partnership with a leading investment bank to offer forward rate loans to local authorities.  More details on these loans will be available in the near future.

Short Term Loans

Short term loans for maturities of less than one year.  Typically, these loans will require interest to be paid at maturity together with the principal.

These loans will be funded through a commercial paper programme and will not be subject to the proportional guarantee.  Security will be granted to buyers of the commercial paper by securing their investment on the pool of short-term loans funded by each issue of commercial paper.

This structure does not materially affect the position of local authorities given that an authority’s debts are secured on all its revenues under the Local Government Act 2003.  The granting of security over the loan grants an investor, in the event of default, the same rights as any other lender to a local authority including the PWLB.

Supplementary Documentation