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Treasury Statute

Treasury Statute of the RIPE NCC
  1. Purpose of the Treasury Statute
  2. Principles of the financial policy in terms of return and risk
  3. Financial instruments and financial arrangements
  4. Banking facilities
  5. Third parties
  6. Code of Conduct
  7. Delegated authority framework

1. Purpose of the Treasury Statute

The purpose of this document is to set out the principles with regard to the stable management of the RIPE NCC financial reserves. The RIPE NCC has a very conservative financial policy aimed at minimising the risk for its financial reserve. The stable financial asset management must be achieved with respect to the principles of public accountability, and in compliance with the principles set out over the years with regard to the stable and sound management of the RIPE NCC financial reserves.

The Treasury Statute addresses the risks encountered by the RIPE NCC related to its activities and establishes a framework of management for those risks.

The documentation and enhancement of a treasury risk management framework is necessary to ensure stability in asset management and consistent practices. This document will also prevent the exposure of funds to risks outside of limits acceptable to the RIPE NCC.

2. Principles of the financial policy in terms of return and risk

General

The financial principles are agreed between the Executive Board and the RIPE NCC Management and are aimed at risk reduction and financial stability. The financial goals are:

  • The general financial policy is very conservative.
  • The assets are spread over low-risk asset classes to decrease counterparty risk from, for instance, financial institutions.
  • The main goal for the assets of the RIPE NCC is to minimise the risk by preserving the principle amount at the best possible return.
  • The assets are spread over more than one currency to decrease the exposure towards one single currency.
  • The assets denominated in other currencies may accumulate to a maximum of 50% of the total financial reserve.
  • Most funds must at all times be available to the RIPE NCC organisation. Liquidity of funds is an important factor for unforeseen financial circumstances that may suddenly appear.
  • There will be a tiered structure for the maturities and liquidity of the funds.
  • Investment assets at banks are held segregated from the bank balance in a separated entity (the Custodian) at all times. If a bank defaults, these assets are owned by the RIPE NCC and will not be part of the bank defaulting.
  • Definition of:
    • Different term-strategies
    • Credibility and rating of fixed income
    • Counterparty risks of “general” banks

 

Working capital

Working capital is defined as: Annual contributions + 20% of the total reserves.

Return

The RIPE NCC does not have the management of its financial reserves as a goal. Return on the assets is subject to the minimisation of risk. The RIPE NCC aims at an overall target return of: Euribor* 12 months + 0.5%.

* The Euribor (Euro Interbank Offered Rate) is the benchmark rate offered by one bank to another primary bank on the interbank money market at which deposits with maturity up to one year in Euro within the European Economic and Monetary Union. Euribor rates are available for all maturities from 1 to 12 months.

Overall strategic asset mix:

% as per 01-04-2010Overall Asset Mix
Minimum Standard Maximum
a. Fixed income 10% 40% 50%
b. Deposits 10% 50% 60%
c. Current account 5% 10% 15%
d. Equity 0% 0% 0%
Overall 100%

The overall asset mix will be divided into three parts: short-, mid- and long-term reserves.

Each part has its own guideline:

Short-term reserves (working capital) (<1 year), very low risk (30%):

% as per 01-04-2010

Asset Mix as % of Total Assets

 

Minimum

Standard

Maximum

a. Fixed income

0%

10%

20%

b. Deposits

10%

15%

30%

c. Current account

0%

5%

10%

Total short-term reserves

 

30%

 

Mid-term reserves (working capital) (>1 year, <3 years), very low risk (60%):

% as per 01-04-2010

Asset Mix as % of Total Assets

 

Minimum

Standard

Maximum

a. Fixed income

10%

20%

25%

b. Deposits

20%

35%

40%

c. Current account

0%

5%

10%

Total mid-term reserves

 

60%

 

Long-term reserves (surplus) (>3 years), very low risk (10%):

% as per 01-04-2010

Asset Mix as % of Total Assets

 

Minimum

Standard

Maximum

a. Fixed income

0%

10%

10%

b. Deposits

0%

0%

10%

Total long-term reserves

 

10%

 

3. Financial instruments and financial arrangements

Guidelines on investment:

General:

All investments must be daily callable (daily liquidity) apart from deposits.

Fixed income:

  • Fixed income investments can be denominated in Euro or in other currencies that are instantly exchangeable versus the Euro;
  • Fixed income should be rated at the highest current rating, at the moment this is at least S&P AA, Moody’s AA2 or higher;
  • At least 70% of the bonds must be government bonds of the highest current rating in principle this will be outstanding quality (AAA) but in case no country meets this criterion the next highest rating;
  • In case a fixed income asset is downgraded, the Executive Board will jointly with the CEO and CFO decide on whether this asset can be retained or will be sold.
  • The fixed income must be spread across a diversity of countries with an aim to have at 4 or more different countries at an equal footing within the portfolio at any point in time;
  • The fixed income must be liquid and daily trade able in an efficient market
  • The fixed income assets will not actively be traded and will have a good spread across maturity;
  • The fixed income part of the strategies can be placed in individual bonds;
  • The remaining duration to maturity of individual bonds is maximum 10 years.

Treasure Statute Investment 2014

Deposits:

  • Deposits will be placed with first class banks, rated at the best current bank grade or the second best current bank grade;
  • Deposits will have a rolling maturity over the course of the year;
  • All deposits should not sit with any one organisation for more than 35% of the total of all deposits;
  • Deposits will have a duration that reflects the yield curve and thus may vary over time but should not exceed one year.

Current account:

  • All cash accounts will be held in Euro.

Monitoring of investments and deposits

All investments and deposits will be actively reviewed and monitored by the CFO and the Treasurer of the Executive Board. On a monthly basis a short report will be presented to the Executive Board. On a quarterly basis an extensive report, including advisories from the different financial institutions will be provided to the Executive Board and the Management. Discussion on the investments, deposits and the Treasury statute will take place when needed but will at least once a year be part of the Executive Board meeting for review.

4. Banking facilities

Approved counterparties

RIPE NCC banking activity may only be transacted with counterparties for whom approval has been granted by the Executive Board. These counterparties shall be first class institutions and be rated at the highest current bank grade or the second highest current bank grade. If an institution rates for a period of more than half-a-year lower than these 2 highest grades it will be removed from the approved counterparties list and the deposits will be transferred to another institution.

5. Third parties

The RIPE NCC management may consult third parties on a regular basis for financial advice or for support in asset management reporting. These third parties must comply with this document. The management will provide a copy of this document to these third parties. Third parties must refer to this document in their contract with RIPE NCC.

Preferably, third party advisors will have a quality certification such as SAS-70 type II.

6. Code of conduct

All individual members of the Executive Board, the RIPE NCC Management and third parties should act according to the highest ethical standards regarding this document in all circumstances. This means that all members must avoid any conflict of interest between private and business interests.

The compliance with this Code will periodically be discussed in the meetings between the Executive Board and the RIPE NCC Management. Apparent doubt as to compliance with this Code will be reported directly in these meetings.

7. Delegated authority framework

All activities are authorised by dual-authorisation. The transfer of funds must meet the requirements stipulated by the Financial Transaction Authorisation Procedure.

Activity

Delegated Authority

Parameters

Banking

 

 

Opening bank account

CEO + CFO

Must be an approved counterparty

Closing bank account

CEO + CFO

Must be an approved counterparty

Financial markets

 

 

Approval of short-term investment strategy

Treasurer of the Board + CFO

Must be approved by the Executive Board

Approval of mid-term investment strategy

Treasurer of the Board + CFO

Must be approved by the Executive Board

Approval of long-term investment strategy

Treasurer of the Board + CFO

Must be approved by the Executive Board

Fixed Income

 

 

Establishing fixed income

Treasurer of the Board + CFO

Must be an approved counterparty

Deposits

 

 

Establishing credit arrangement

CEO + CFO

Must be an approved counterparty

Information Obligation

Frequency

 

Investments short-term

Monthly

CFO towards Executive Board

Investments mid-term

Quarterly

CFO towards Executive Board

Investments long-term

Quarterly

CFO towards Executive Board

Investment results

Quarterly

CFO towards Executive Board

Reporting overall asset-mix

Quarterly

CFO towards Executive Board

Risk management Report

Quarterly

CFO towards Executive Board

Contact person:

The following person may be approached on a routine basis in relation to this procedure:

J.R. de Ruig, CFO

 

This document is agreed upon by the RIPE NCC Executive Board:

 

And the Management: