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Annual Report 2016 of the Brussels Capital Region’s Debt Agency 2
TABLE OF CONTENTS
INTRODUCTION ....................................................................................................................................................... 5
PART 1 : REGIONAL DEBT - ESA 2010 ...................................................................................................................... 7
CHAPTER 1 : COMPOSITION OF THE REGIONAL DEBT ................................................................................. 7
CHAPTER 2 : KEY FIGURES OF THE DEBT ...................................................................................................... 9
CHAPTER 3 : INFLATION HEDGING OF REGIONAL BUDGET ....................................................................... 10
3.1. HISTORY ........................................................................................................................................... 10 3.2. OUTLOOK 2017 ................................................................................................................................. 10
PART 2 : ESA DEBT ................................................................................................................................................. 11
PART 3 : TOTAL DIRECT DEBT ................................................................................................................................ 13
3.1. MANAGEMENT REPORT ........................................................................................................................... 13
CHAPTER 1 : DECISION AND CONTROL PROCESSES ................................................................................... 13
1.1. DECISION-MAKING PROCESS (LEGAL FRAMEWORK) .................................................................................... 13 1.2. DECISION-MAKING PROCESS (FINANCIAL STRATEGY COMMISSION)............................................................... 14 1.3. CONTROL PROCESS (OOBAC) .............................................................................................................. 15 1.4. CONTROL PROCESS (COURT OF AUDITORS) .............................................................................................. 16 1.5. CONTROL PROCESS (EUROSTAT - NAI - NBB) .......................................................................................... 16
CHAPTER 2 : MACROECONOMIC CONTEXT ............................................................................................... 17
2.1. GLOBAL MACROECONOMIC ENVIRONMENT .............................................................................................. 17 2.2. MACROECONOMIC ENVIRONMENT OF THE EUROZONE ............................................................................... 19
2.2.1. FINANCIAL EVOLUTIONS .............................................................................................................. 19 2.2.2. ECONOMIC ACTIVITY ................................................................................................................... 20 2.2.3. EVOLUTION OF PRICES ................................................................................................................. 20 2.2.4. EVOLUTION OF CREDIT ................................................................................................................ 21 2.2.5. BUDGET POLICIES AND STRUCTURAL REFORMS ................................................................................. 21 2.2.6. MONETARY POLICY INSTRUMENTS ................................................................................................. 21
CHAPTER 3 : KEY FIGURES .......................................................................................................................... 23
3.1. TOTAL DIRECT DEBT OUTSTANDING (ST & LT) .......................................................................................... 23 3.2. COST OF FUNDING .............................................................................................................................. 24 3.3. PORTFOLIO DURATION(S) ..................................................................................................................... 27
3.3.1. « CLASSIC » DURATION ............................................................................................................... 27 3.3.2. DURATION OF FUNDING .............................................................................................................. 28 3.3.3. DURATION OF RATE .................................................................................................................... 28
3.4. PORTFOLIO STRUCTURE ....................................................................................................................... 29 3.5. DEBT BURDEN .................................................................................................................................... 30 3.6. MARK TO MARKET RISK ........................................................................................................................ 30 3.7. DEBT SERVICE COVERAGE RATIO ............................................................................................................ 31
CHAPTER 4 : LONG-TERM DEBT ................................................................................................................. 32
4.1. REGIONAL STRATEGIES 2016 ................................................................................................................ 32 4.1.1. SOURCES OF FUNDING 2016 ........................................................................................................ 32
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 3
4.1.2. FUNDING AND MARGINS IN 2016 ................................................................................................. 33 4.1.3. SOURCES OF FUNDING AND MARGINS BETWEEN 2009-2016 ............................................................. 33
4.2. ACTIVE DERIVATIVE PRODUCTS ON 31 DECEMBER 2016............................................................................. 34 4.3. COUNTERPARTY RISK ........................................................................................................................... 35
CHAPTER 5 : SHORT-TERM DEBT ............................................................................................................... 35
5.1. MANAGEMENT TOOLS ......................................................................................................................... 35 5.1.1. CASHIER’S CONTRACT ................................................................................................................. 36 5.1.2. MTN PROGRAM ........................................................................................................................ 36 5.1.3. SHORT TERM DEBT : COMPOSITION AND FINANCIAL COST ................................................................... 37
5.2. TREASURY BILLS (<1 YEAR) ................................................................................................................... 39
CHAPTER 6 : FINANCIAL COORDINATION CENTRE (FCCB) ......................................................................... 41
6.1. INTRODUCTION .................................................................................................................................. 41 6.1.1. HISTORY AND MISSIONS .............................................................................................................. 41 6.1.2. OUTLOOK 2016 ........................................................................................................................ 42
6.2. DESCRIPTION ..................................................................................................................................... 42 6.2.1. OPERATIONS ............................................................................................................................. 42 6.2.2. FCCB STRUCTURE ...................................................................................................................... 44 6.2.3. FINANCIAL DATA 2016 ............................................................................................................... 46
6.3. REGIONAL GAIN ................................................................................................................................. 49
3.2. PERSPECTIVES ........................................................................................................................................... 51
CHAPTER 1 : AMORTIZATION SCHEDULE ................................................................................................... 51
CHAPTER 2 : NEW FINANCING AND REFINANCING REQUIREMENTS ........................................................ 52
CHAPTER 3 : EVOLUTION OF DIRECT DEBT STRUCTURE WITH FCCB AND CONSOLIDATIONS ................... 54
CHAPTER 4 : FUTURE COST OF PORTFOLIO (2017-2021) - STRESS TEST .................................................... 55
CHAPTER 5 : REGIONAL STRATEGIES 2017 ................................................................................................ 56
PART 4 : GUARANTEED DEBT ................................................................................................................................ 57
CHAPTER 1 : MANAGEMENT OF GUARANTEES ......................................................................................... 57
CHAPTER 2 : PRESENTATION OF THE NEW SYSTEM FOR A DYNAMIC MANAGEMENT OF GUARANTEES . 57
CHAPTER 3 : RECONSTRUCTING THE REGIONAL GUARANTEES OUTSTANDING BASED ON INDIVIDUAL OPERATIONS .............................................................................................................................................. 58
CHAPTER 4 : REGIONAL GUARANTEES AMOUNTS ..................................................................................... 60
PART 5 : APPENDICES ............................................................................................................................................ 63
CHAPTER 1 : STANDARD & POOR’S PRESS RELEASE .................................................................................. 63
CHAPTER 2 : REGIONAL DEBT OUTSTANDING ........................................................................................... 67
2.1. TOTAL DIRECT DEBT (OUTSTANDING) ...................................................................................................... 67 2.2. INDIRECT DEBT (OUTSTANDING) ............................................................................................................ 69 2.3. REGIONAL DEBT STRICTO SENSU (OUTSTANDING) ...................................................................................... 70
CHAPTER 3 : DEBT OUTSTANDING UNDER ESA95 STANDARD .................................................................. 72
CHAPTER 4 : DEBT OUTSTANDING UNDER ESA2010 STANDARD .............................................................. 74
CHAPTER 5 : PORTFOLIO COST OF FUNDING HISTORY .............................................................................. 75
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 4
CHAPTER 6 : PORTFOLIO DURATION HISTORY ........................................................................................... 76
CHAPTER 7 : PORTFOLIO STRUCTURE HISTORY ......................................................................................... 77
CHAPTER 8 : PORTFOLIO AMORTIZATION SCHEDULE ............................................................................... 78
CHAPTER 9 : GUARANTEED DEBT OUTSTANDING AND DEFAULT RATIOS ................................................. 79
CHAPTER 10 : CONSOLIDATED DEBT LOANS .............................................................................................. 80
PART 6 : GLOSSARY ............................................................................................................................................... 82 1. REGIONAL CONCEPTS ............................................................................................................................. 82 2. ANALYTICAL INSTRUMENTS ...................................................................................................................... 83 3. FINANCIAL PRODUCTS ............................................................................................................................. 85
INDEX .................................................................................................................................................................... 87
CHARTS ...................................................................................................................................................... 87
TABLES ....................................................................................................................................................... 88
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 5
INTRODUCTION
The Brussels-Capital Region is one of the three Regions, with the three Communities, composing the
Belgian federal state. The Region has its own institutions since 1989. They were created by the
Special Law of 12 January 1989, under the article of the Constitution which set up the existence of
three Regions in Belgium since 1970.
The Region’s inhabitants elect every five years their regional members that make up the Regional
Council, also known as the Brussels Parliament. The Regional Council makes laws through
ordinances. The Council elects and monitors the Regional Government. It consists of a Minister-
President and four Ministers to which are added three Secretaries of State.
The main domains in which the Region exercises its powers are Urbanization, Housing, Environment,
Economy, Labour, Transportation, Public works, Energy, Local authorities and related (municipalities,
intermunicipalities, religion), Foreign relations and Science research.
Starting on 1st July 2014 (implementation of the 6th State reform), supplementary federal
competences have been totally or partially transferred to Communities, Regions or Communautary
Commissions. The most important among them being dependents’ allowances, welfare, labour
market, road safety, rent regulations, Houses of justice and mortgages’ fiscal regime1.
Between 1996 and 2006, the Brussels-Capital Region enjoyed a long-term rating of AA with a stable
outlook given by the rating agency Standard & Poor's. On 1st October 2007, the outlook improved,
from stable to positive. On 16 December 2009, the outlook went back from positive to stable due to
stagnant revenues and rising debt in the region. On 1st June 2010, the outlook changed from stable to
negative because of the excessive regional indebtedness. On 7 March 2014 Standard & Poor's
confirmed its rating of long-term reference AA given to the Region. The perspective was stable,
passing from negative. On 24 February 2017, Standard & Poor’s confirmed the Region’s long term
credit rating (AA stable)2.
This AA notation is excellent and builds, in the words of Standard & Poor's, on good budget
performance, sophisticated financial management, tight control over its related companies and easy
access to liquidity. The guaranteed debt is described as well-defined and the management thereof,
active. RBC also has a wealthy and attractive economy. His operating performance has been solid. It
demonstrates consistent capacity to control operating expenditures (in particular through the set up of
a budget monitoring committee since early 2016 and a good management of the sixth State reform).
The stable outlook reflects Standard & Poor’s expectation that over the next two years (2017-2019)
the Region will pursue its good budgetary performance.
1 "A transition period was introduced from 1 July 2014 until at least January 1, 2015. During this period, existing
regulations will continue to apply until a community or region decides to make changes or to introduce new rules. The Regions and Communities are competent, but members of the federal staff, who managed files before 1 July 2014 will continue to do so. They will no longer act on behalf of the federal government, but in the name of the relevant Communities and Regions. The files related to transferred competencies are still managed by the federal public service during the transition period. Budgets and staff will be transferred from 1 January 2015 on." Translated from http://www.belgium.be/fr/actualites/2014/news_entree_en_vigueur_de_la_6e_reforme_de_l_etat.jsp
2 The Standard & Poor’s press release is in Part 5, Chapter 1.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 6
The Standard & Poor’s rating is of great importance, as it sets the conditions at which the Region
finances itself on the capital markets. Moreover, the Regions and Communities can’t have a rating
superior to that of the Federal State.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 7
PART 1 : REGIONAL DEBT - ESA 2010
CHAPTER 1 : COMPOSITION OF THE REGIONAL DEBT
The debt structure of the Brussels-Capital Region is divided as follows:
A. The regional debt according to the ESA20103 standard includes the total direct debt of the
Region and the debt of the institutions in the ESA2010 perimeter. Eurostat determines the
institutions to be consolidated.
B. The total direct debt is the total of the cumulative net borrowing (stricto sensu direct debt)
since the creation of the Region and the debt taken over from the SIAMU (fire service and
3 The European system of regional and national accounts (ESA2010) defines a common accounting framework for the Member
States of the European Union
Regional debt (broadest scope)
A. Regional debt according to
ESA2010 standard
B. Total direct debt
C. Direct debt
(stricto sensu)
=Cumulative net borrowing
E. Floating debt (ST)
Consolidated debt
stricto sensu (LT)
D. Debt taken over (LT)
Consolidated debt (LT)
Debt of consolidated
entities
F. Indirect debtG. Guaranteed
debt
Out of ESA2010 standard
G. Guaranteed debt of non-consolidated
entities
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 8
emergency medical assistance), the Regional Agency for Cleanliness, the former Province of
Brabant and the former Brussels agglomeration. The latter’s repayment of the principal is
defined in the budget in terms of "depreciation of capital".
C. The cumulative net borrowing represents the cumulative cash deficit (debt - amortizations +
floating debt) of the Region.
D. The debt taken over has been included in the total direct debt in early 1996. The Region has
taken over the debts of SIAMU (fire service and emergency medical assistance); the Regional
agency for cleanliness, the former province of Brabant and the former Brussels agglomeration.
These have been renegotiated for a total of € 158.65 million (a part of which had already been
amortized in 1995). The debt taken over has ceased to exist on December 31, 2009. Since
then the concept of cumulative net borrowing and total direct debt merge.
E. The floating debt includes the fixed-term advances (ATF), overdrafts and the MTN program
which includes treasury bills (BT). The floating debt (short-term) and the consolidated direct
debt stricto sensu (long term) form the cumulative net borrowing.
F. The indirect debt includes loans that the Region pays on behalf of other institutions. Budget-
wise the repayment of these loans is set in terms of “re-entry”.
G. Guaranteed debt: Region allows certain institutions of the Brussels-Capital Region to contract
financial commitments (loans, commercial debts, rents, …) with regional security. Amortization
and interest expenses are borne by the institutions. The Region intervenes only in case of a
default.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 9
CHAPTER 2 : KEY FIGURES OF THE DEBT
Table 1 : Debt statistics of the Brussels-Capital Region as of 31 December (in million € or in %)
2015 2016
Rating issued by Standard and Poor's
- Long term AA AA
- Perspective Perspective stable Outlook stable
1. ESA2010 debt (net)
Outstanding 4,532.84 € € 4,533.52
- Annual change -2.34 % +0.01 %
- Debt / total revenue 105.00 % 98.11 %
2. Total direct debt
Outstanding 2,750.38 € € 2,688.01
Annual change -6.76 % -2.27 %
Long term (%)4 97.03 % 95.56 %
Short-term (%)5 2.97 % 4.44 %
Fixed rate 98.69 % 97.87 %
Variable rate 1.31 % 2.13 %
Funding sources (long term)
- Bank loans 0 % 0 %
- Bilateral loans 0 % 0 %
- Medium Term Notes 0 % 100 %
- Schuldschein 100 % 0 %
Counterparty types (long term)
- Belgian 0 % 0 %
- Foreign 100 % 100 %
Interest paid (LT + ST) 112.36 € € 103.75
Accrued interest (long-term) 106.81 € € 103.84
Amortizations 217.00 € € 156.00
Refinancing (LT + ST) 15.00 € + 0.00 € € 50.00 + € 6.00
New financing 0.00 € € 0.00
Cost of funding 4.02 % 3.98 %
Duration (in years) 9.88 9.65
Duration of funding (in years) 8.24 7.84
Duration of interest (in years) 12.94 12.79
Coverage of debt service6 546.95 % 313.36 %
Debt burden7 2.69 % 2.33 %
3. Guaranteed debt
Outstanding 2,602.52 € € 2,707.13
Annual change +1.79 % +4.02 %
4 Outstanding long term debt on outstanding total debt.
5 Outstanding floating debt on outstanding total debt.
6 Starting in 2012, Standard & Poor's assesses the available liquidity of the Brussels-Capital Region via the debt service coverage
ratio of the following 12 months (considering only certain liquidity). 7 Ratio interest + management budget fund over expenses (accrual).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 10
CHAPTER 3 : INFLATION HEDGING OF REGIONAL BUDGET
3.1. HISTORY
In 2010 the Debt Agency conducted a study on the sensibility of the Brussels-Capital Region‘s budget
(under the ESA standard) to inflation. It conducted this analysis by itself and met most of the financial
partners of the Region, in order to study the most suitable derivatives to cover the regional risk. The
model applied to the initial 2010 budget and was annually updated.
The sensibility of the net regional consolidated budget was estimated at € 200 million (paying
inflation). On this basis the Region decided to cover half (that is € 100 million) of the risk linked to the
sensibility of the consolidated budget over a 5-year period via an optional structure, a cap-spread
(purchase of a 2% cap and selling a cap at 4%) linked to the sale of a floor at -1%. The annual
premium amounts to 0.36%.
European inflation (HICP ex-tobacco) was flat at 0.50% in October 2016, the cap and floor were thus
not activated.
Table 2 : History of the structure “inflation”
Year Yearly premium Takings Hedging cost
2012 359,000.00 140,214.90 218,785.10
2013 359,000.00 0.00 359,000.00
2014 360,994.44 0.00 360,994.44
2015 358,002.78 0.00 358,002.78
2016 358,002.78 0.00 358,002.78
Beginning in February 2014, the limits have been modified without changing the premium. They were
moved to 1,66%/2,50% for the cap-spread structure, the floor staying at -1%.
3.2. OUTLOOK 2017
The profile of regional exposure to inflation is evolving. The last estimate, based on the initial budget
2017, points to a paying sensibility on a 400 millions € volume. This greater sensibility to inflation is
essentially due to the important rise of expenses in investments (tunnels, subway) in the regional
budget, that weighs proportionnaly more in our model than the other categories of expenses (general
goods and services, wages).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 11
PART 2 : ESA DEBT
The ESA95 norm, in application since 2002, consolidates all the debts (excepted commercial debts,
among others) in the balances of regional institutions belonging to the public administrations sector
(s.1312) with the government’s services (the Brussels’ Regional Public Service 8). This consolidation is
purely an accounting one, its result being called “Consolidated Gross Debt” or “Maastricht Debt”.
In February 2014, during a meeting with the federal and federated institutions of Belgium, a Eurostat
delegation notified its will to consolidate all entities or activities having incurred a debt on behalf of the
public administrations sector.
On 1st September of the same year, the ESA95 norm was replaced with the ESA2010 norm that
introduces new concepts such as, and not limited to, « captive financial institutions », having had for
effect the consolidation in the S1312 sector of institutions that formerly weren’t.
Three successive « waves » of ESA consolidations were thus made by Eurostat in 2014, via its
national agent, the National Accounts Institute (NAI9).
For the Brussels-Capital Region, it meant the consolidation of additional debts from forty institutions.
The consolidated regional debt outstanding is presented in this report under the ESA 2010
methodology. Differences can nonetheless appear between these figures and those officially
published by the NAI, because of the time of recording, infra-sector compensating (debts
corresponding to assets within the same subsector) taken into account or not.
The objective of the NAI and the debt agency is one of correct representation of the regional debt, and
contacts take place several times a year to explain and correct the differences between the two series.
A financial account, which contains more detailed data than the balance accounts,
A financial account in the sense of ESA, is given by the Region to NAI each quarter. It contains more
detailed data than the balance accounts, and should thus allow a better approach of the consolidated
regional debt.
The treasuries and placements balances of the institutions to be consolidated are, in our tables,
subtracted from the gross consolidated debt. This methodology is applied by the debt agency on basis
of three elements :
the retroactive characteristic of the ESA norm. Indeed, the debts of a consolidated
institution are integrated in the NAI serie since 1995 ;
the position of Eurostat, which allows to consolidate the gross debt with the treasuries
balances included in a cash pooling contract between the institution and the public
administration ;
art. 68 of the Ordonnance du 23 février 2006 (OOBCC), which organizes the centralization
of the regional treasuries via a notional cash pooling system. In application of this article:
8 « Brussels Regional Public Service » (BRPS) replaces « Ministry of the Brussels-Capital Region » (MBCR).
9 NAI (created by Law of 21 December 1994) consists in representatives of three institutions: the DG Statistics and Economical
information, the National Bank of Belgium and the Federal planning bureau. The NAI works together with those institutions but establishes the statistics, national accounts and economical previsions under its own responsibility.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 12
- all institutions in the S1312 sector (with the exception of the FRBRTC)
automatically enter in the scope of the regional cash pooling, through a contract
between the Region and the institution;
- an institution that is in the regional cash pooling can’t make any further
investments, and all its accounts are, barring exception, centralized in the
financial cash pooling. All treasuries and investments are thus eventually
reintegrated in the cash pooling.
Whenever the term « ESA » debt is used in the present report, it refers to the gross consolidated debt,
minus the creditor accounts and the treasury placements of the institutions to be consolidated.
Table 3 : Gross consolidated debt (« Maastricht ») and creditor balance of S1312 institutions
in thousand € 2012 2013 2014 2015 2016
1. Regional Direct debt 3,146,036 3,020,528 2,949,897 2,750,376 2,688,012
2. Other consolidated regional debts 1,755,761 1,883,579 1,926,506 2,072,277 2,207,249
3. « Maastricht » gross consolidated
debt – ESA2010 4,901,797 4,904,107 4,876,403 4,822,653 4,895,261
4. Creditor balance of institutions
within the consolidation perimeter -389,201 -370,066 -235,172 -289,808 -361,742
Total net ESA debts(3+4) 4,512,596 4,534,041 4,641,231 4,532,844 4,533,519
Table 4 : (Total debts/total income) ratio
in thousand € 2012 2013 2014 2015 2016
1. Debt totals 4,512,596 4,534,041 4,641,231 4,532,844 4,533,519
2. Income totals 3,068,578 3,468,536 3,639,133 4,316,949 4,620,926
(Total debts/total income) ratio 147.06% 130.72% 127.54% 105.00% 98.11%
This ratio lets us determine the Region capacity, in a consolidated vision, to cover its future financial
obligations (financial debts) compared to its own annual receipts.
The debt/income ratio (receipts of the Region and own receipts of the institutions) for 2016 is 98.11%.
It was 105.00% end 2015. This sharp decrease is due to the receipts (+7.04%) increasing more than
the total of debts (+0.01%).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 13
PART 3 : TOTAL DIRECT DEBT
3.1. MANAGEMENT REPORT
CHAPTER 1 : DECISION AND CONTROL PROCESSES
1.1. DECISION-MAKING PROCESS (LEGAL FRAMEWORK)
Four legal sources define the environment in which the management of the debt must be carried out.
The special law of 16 January 1989 art.49, on the financing of the Communities and
Regions, allows Regions and Communities to raise loans under certain conditions.
By voting the budget of ways and means, the Regional Council gives the government of the
Brussels-Capital Region the capacity to raise loans and enter into any transaction, including
derivatives, the issuance of commercial paper, ...
In art.9 of the Government Order of 18 July 2000 of the Brussels-Capital Region, the
Government authorizes the Minister of Finance to raise loans, to manage debt in the short,
medium and long term, and to issue commercial paper.
In the Ministerial Order of 1 June 2004 (as amended by the Ministerial Order of 25 June
2007), the Minister of Finance delegates to the Administration of Finance the power to enter
into any short-term operation (from 1 day to 1 year), as well as derivative transactions as
part of a strategy predetermined by the Financial Strategy Commission.
The Financial Strategy Commission is composed of:
the Cabinet of Finance;
the Administration of the Region (Deputy Secretary General, the Director of Finance, the
Director of Financial Management and the Departments of Debt Management and
Treasury);
the cashier of the Region which acts as advisor for free.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 14
1.2. DECISION-MAKING PROCESS (FINANCIAL STRATEGY COMMISSION)
The Brussels-Capital Region makes use of derivatives solely for hedging purposes. These products
are systematically matched with existing underlying loans or will match them in the near future.
Legal frame •special law
•orders
•budget
Debt Agency
•active portfolio management taking into account maturities, refinancing, repayment plan, interest rate risk, liquidity risk, cash requirements, ...
•taking into account external factors: future budget deficits, changes in the yield curve and macroeconomic outlook
•suggestions of operations on the loan portfolio
Financial Strategy
Commission
•evaluating the suggested operations by the Debt Agency in terms of cost and risks
•proposed operations to the Ministre of Finance
Ministre of Finance and
Budget•decision
Debt Agency (Front Office)
•market consultation
•putting the bids in competition
Concluding the
transaction
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 15
1.3. CONTROL PROCESS (OOBAC)
The Organic Ordinance on the provisions applicable to the Budget, Accounting and Control (OOBAC),
published in the Moniteur Belge on 23 February 2006, fixed additional normative rules to the Law of
May 16, 2003 (general provisions applicable to budget, control of subsidies and accounting of the
Communities and Regions) that the Brussels Parliament has decided to apply with regard to the
Brussels-Capital Region.
It applies to the Administration and the autonomous administrative bodies of the Brussels-Capital
Region. Its scope extends to all Budget allocations. It sets out the principles of budgeting (voting of an
annual Ordinance, good financial management, principles of economy, efficiency, effectiveness and
transparency; determination for a budget year of the nature, amount and origin of revenues and
destination of expenses as well as the resulting budgetary and financial balance).
The Ordinance points out in Chapter III Article 21 the general presentation of the budget that is
presented at the end of the year to the Brussels Parliament must contain "a financial report which
includes a report on the regional debt and cash.”
The control system includes an internal control, management control, internal audit, and an
administrative and budgetary control:
internal control is a process designed to provide reasonable assurance in particular
regarding the reliability of financial information. "Internal control is carried out by each
service (...) on the basis of written procedures." Article 77 states that: "the control of sound
financial management is a set of procedures designed to ensure that the objectives are
achieved in an economical, efficient and effective manner and that the budget was spent
only for the purposes specified and within the approved limits. It is independent of the
managing services and autonomous administrative bodies that initiated the operation it
examines.";
management control is, according to Article 78, "a set of procedures that aims to quantify
and measure the objectives and guidance notes (...).It is independent of the managing
services and autonomous administrative bodies that initiated the operation it examines and
is exercised in the manner prescribed by the Government. ";
internal audit is described in section 80 as "an independent and objective activity of
assurance and guidance, whose mission is to bring added value and improve the
functioning of the organization. The internal audit function is essentially to examine and
evaluate the operation, effectiveness and efficiency of internal control. ";
the administrative and budgetary control is provided by the Inspectors of Finance. Article 81
states that they "fulfil their mission based on documents and on-site. They have access to
all files and all records (...) and receive (...) all the information they require. The Government
can also charge the Inspectors of a mission regarding the financial and budgetary aspects
of the Administration or the autonomous administrative institutions. "
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 16
1.4. CONTROL PROCESS (COURT OF AUDITORS)
The law of May 16, 2003 abolished the prior approval of the Court of Auditors, considered as heavy
and inappropriate for the transition to an accrual accounting. In addition, the prior approval could put at
risk the Court itself which could end up contesting an operation it had approved beforehand.
The OOBAC describes the new role of the Court of Auditors in the process of auditing the accounts of
the Brussels-Capital Region. Article 84 says that "the Court of Auditors shall examine the legality and
regularity of expenditure and revenue. Regarding the latter, the Court exercises general control over
the operations relating to the establishment and recovery. (...) The Court of Auditors shall be
empowered to request any documents and information of any kind whatsoever relating to the
management of Government departments and autonomous administrative bodies under its
administrative control. It can organize an on-site control. "
Through OOBAC, the Brussels-Capital Region charges the Court of Auditors with the certification of its
accounts. The audit is based on ISSAI (International Standards of Supreme Audit Institutions)
standards that are set by the INTOSAI (International Organization of Supreme Audit Institutions).
"The general account of the Regional Entity is established by the Government and sent for certification
to the Court of Auditors (...). Certification means a reasoned and supported opinion on regularity,
sincerity and loyalty of the general account of the regional entity. The Court of Auditors shall transmit
such certification to Parliament in the annex to the general account with its observations "(Article 60).
During this certification, the data of the regional debt are controlled (verification of contracts and bank
confirmations encoded in various computer applications and comparing them to payments and
revenues with regard to debt management).
In the audit report of the Court of Auditors of 6 April 2011, as part of the certification of the general
account 200810 of Government Services, we read that "the analysis of contractual procedures for the
debt management revealed developed internal controls. In particular the procedures incorporate the
ministerial and the administrative levels throughout the phases of financial operations. All payments
that have been selected for a particular audit review belong to the category of interests on the
consolidated direct debt and on commercial paper. This examination revealed that the selected flows
were in this case properly conducted and recorded in accordance with the applicable procedures and
internal controls."11
1.5. CONTROL PROCESS (EUROSTAT - NAI - NBB)
Eurostat is the European agency for the collection of statistical data collected by the Member States.
In Belgium, the National Accounts Institute (NAI) provides Eurostat with the data.
The National Bank of Belgium (NBB) controls short-term operations made by the Treasury Department
of the Region. In addition, since 2012, the NBB asked the Debt Agency to fill twice a year a
10 The General Account of 2008 was the first account certified by the Court of Auditors for the Brussels-Capital Region.
11 In « Certification du compte général 2008 des services du gouvernement de la Région de Bruxelles-Capitale Rapport détaillé
d’audit », Court of Auditors (April 6, 2011), pp. 43 & 44.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 17
standardized table of all debt guaranteed by the Brussels-Capital Region, the first in March with
preliminary figures, and the second in August with the final figures.
Since the beginning of 2014 Eurostat (via the NIA) demands that the Federal state and the federated
entities transmit a detailed financial account resulting from the debt and cash management, and a
financial balance of assets as well.
CHAPTER 2 : MACROECONOMIC CONTEXT 12
2.1. GLOBAL MACROECONOMIC ENVIRONMENT
The Eurozone economy in 2016 has mainly been influenced by :
a) the uneven evolution of growth at the World level
Economic recovery has continued at the World level, without reaching the GDP from before the
crisis. Emerging economies have shown a stronger growth than advanced economies.
Emerging economies have been hit by the slowing of the Chinese economy and the progressive
reduction of the effects of the economic slow down in countries exporting raw materials.
Advanced economies have indeed benefited from more favourable conditions (improvement of
the situation on the labour market and continued accommodating financing policies).
b) weakness of international trade
The global volume of imports in 2016 was 1.7 % on a yearly basis (2.1 % in 2015). Some
structural evolutions that have supported World commerce (free trade, reduction of transport
costs) haven’t done it as much as before.
c) financing conditions
In advanced economies, central banks have maintained their acommodating monetary policies,
the financing conditions have thus therein stayed favourable.
d) low global inflation
The low oil prices and the underuse of production capacity are the main factors for the
moderate inflation at the World level. In OECD countries, consumer prices indexes have
increased from 0.6 % in 2015 to 1.1 % in 2016. Inflation excluding food and energy has slightly
increased on a yearly basis (1.8% in 2016 vs. 1.7% in 2015).
Volatility of oil prices was high in 2016, although staying low. The Brent price started the year at
33 USD (end January) and closed at 55 USD at year’s end. This is due to an increase of
Demand compared to Offer (decrease in production by OPEC and other producing countries;
reducing of investments of American oil companies).
Non-energy raw materials prices have steeply risen.
12 This chapter makes use of data from the ECB 2016 Annual report.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 18
e) growth dynamics has slowed in the big economies
In the USA, GDP growth in volume in 2016 (2.6%) has been less than in 2015 (1.6%). This
comes from improving financing of households, the decline of unemployment and Consumption.
Unemployment level is now only 4.7%. Yearly inflation has increased from 0.1% in 2015 to
2.1% in 2016. Excluding food products and energy, it stood at 2.2% in 2016, from 1.8% in 2015.
In December 2016, the Fed has raised its rates by 25 BPs, to 0.75%. Budget deficit has
increased by 2.5% in 2015, to 3.2% in 2016.
Japan has seen its GDP grow by 1.0% in volume in 2016, following accomodating monetary,
budgetary and financial policies. Unemployment rate was at 3.1%. Inflation got to -0.1% in
2016, due to appreciating of yen and the fall of raw material prices. Excluding fresh food and
energy products, it was 0.6% in 2016. Bank of Japan has continued its qualitative and
quantitative easing monetary policies to fight the pressure on falling prices and the slowing
down of its economy.
In the UK, GDP growth has decreased from 2.2% in 2015 to 2.0% in 2016. The results of the
referendum entailing the exit of the European Union has led to a strong depreciation of the
Sterling Pound. Inflation rose back (0.0% in 2015). The easing monetary policy was kept so
during all of 2016, with a policy interest rate decreased by 25 BPs in August, at 0.25% and has
extended its asset buybacks. To insure the transition to exiting the European Union, the
Government has put inplace targeted measures (housing, investing in infrastructure).
In China, GDP growth decreased from 6.9% in 2015 to 6.7% in 2016 (strong Consumption and
infrastructure expenses). Inflation has reached 2%. A sluggish foreign demand has made the
volume of exports, as well as imports, part of which is intended to be re-exported after
assembly, fall.
f) Stability of the euro exchange rate
The effective nominal exchange rate of euro vs. currencies of the main commercial partners of
the Eurozone has globally been stable. Between 2015 and 2016, the euro depreciated in
nominal effective terms vs JPY. It meanwhile appreciated against GBP.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 19
2.2. MACROECONOMIC ENVIRONMENT OF THE EUROZONE
2.2.1. Financial evolutions
The financial evolutions of the Eurozone in 2016 were :
a) euro area money market rates declined
The money market rates continued to decrease in 2016 following the deposit facility rate
becoming negative in June 2014.
The non-standard monetary policy measures implemented by the ECB, the asset purchase
programme (APP) and the targeted long-term refinancing operations (TLTRO) have had an
additional downward pressure on the money market rates via a major injection of liquidity;
therefore making the rates more and more negative.
In march 2016, the deposit facility rate was decreased to – 0.40% and the APP has been upped
from 60 to 80 billions € on a monthly basis. This entailed a new decrease of the yield on the
monetary market (the EONIA, and EURIBOR 3 month and 6 month have become even more
negative).
b) rate decrease, on the average, on government loans
Most rates on government loans have been lower than in 2015. This is due to investors’ worries
(uncertainty in regard to perpsectives of World growth), monetary policy decisions of ECB, in
particular via the public sector purchase programme – PSPP – and the increase of the APP
amounts). The average 10 year government bond yield has dropped 30 BPs in the Eurozone.
A gap between sovereign bond yields within the euro area continued to be observed, even if
moderately.
c) stability in stock markets
The stock prices have been stable in 2016 notwithstanding important cyclic fluctuations (angst
over Chinese growth and the UK referendum). The stock market in the euro area finally
increased by 1% in a year. In the US, shares increased by 10%. In December 2016, the
American stock indexes have reached a historical peak.
d) fall of external financing costs of non-financial companies
The recourse to external funding for the non-financial companies (NFC) sharply increased
(issuance of shares and bonds, trade credits, bank loans, and Assets Purchase Programme -
APP). The cost of external funding for the NFC reached a historical low during the summer of
2016.
e) households wealth improved
The net wealth of households continued to improve (rise in housing an share prices has entailed
important added worth). The financing costs of households stayed low. Household debt
continued to decrease, but stayed at a rather high level.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 20
2.2.2. Economic activity
The average annual growth of GDP was 1.7% in 2016 against 2.0% in 2015, essentially due to
domestic demand (public and private consumption).
a) acceleration of economic recovery
This return to growth was supported by the orientation of the ECB’s monetary policy. This
induced improved financing conditions (low interest rates and improvement in sentiment among
market players). The decline in oil prices and the improvement in the labour market also
contributed to growth.
More than the previous years, the investment of companies (mainly in transport equipment)
contributed to growth. This was reflected by an increase in their profitability, their sales and the
use of their production capacity. The construction industry presented a strong recovery due to a
rise in the Demand (due to growth in real revenues, and to favourable conditions in credits and
mortgage rates) and accommodating policies (tax incentives in some countries).
Private consumption (2,0%) has been pulled by the weak oil prices, employment growth and low
interest rates.
Commercial balance (exports minus imports) contribution to GDP growth has been sluggishin
2016. Beyond China, it is the intra-European trade (Eurozone) that contributed to exports.
The recovery has been felt in the secondary sector – excluding construction (+ 1.6%) – as well
as in the tertiary (+1.8%) and in the construction sector (+2.0%). This last sector recorded its
highest rate of growth since 2006.
b) labour markets slowly recovering
Labour markets continued to recover. Employment has slightly risen (1.2%) during the third
trimester of 2016.
The increase in employment mainly concerned the services and industry sectors (excluding
construction). Employment in the construction sector stayed stable.
Unemployment rate decreased on average from 10.9% in 2015 to 10.0 % in 2016.
2.2.3. Evolution of prices
Inflation in the Eurozone stayed close to zero in 2016. This reflects the weakened inflationary
pressures, internal as well as external.
Inflation in the Eurozone settled at 0.2 %. It was 0.0% in 2015, 0.4 % in 2014 and 1.4 % in 2013. This
is due to falling prices of raw materials (energy and food products).
Inflation excluding energy and food products oscillated between 0.7 et 1.0% (0.8% in 2015 against
0.6% in 2014). The feeble inflation is domestically generated (moderate wage growth) as well as
externally generated (decrease in raw materials prices).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 21
2.2.4. Evolution of credit
The credit growth in the euro area stood at 4.7% in December 2016 against 2.3% in December 2015.
This increase in loan applications happened under the influence of households and non-financial
companies. This is the result of the strong decrease in bank lending rates due to the combined effects
of non-standard measures implemented by the ECB and the decrease in banks’ funding costs.
2.2.5. Budget policies and structural reforms
The general government budget deficit went from 2.1% of GDP in 2015 to 1.8% of GDP in 2016. That
improvement is due to the drop in interest rate burden and cyclical factors that compensated the
deteriorating primary balance. The primary balance partly deteriorated in 2016 due to many countries
using the budgetary consolidation windfall to adopt fiscal policy stimulus (through tax cuts in particular)
in order to sustain economic growth and employment.
The majority of euro area countries have budget deficits below 3% of GDP.
The general government debt decreased from 90.4% of GDP in 2015 to 89.4% of GDP in 2016. This
decline is mainly due to the drop in interest rates and small primary surpluses.
The pace of structural reforms to be implemented stayed as slow as former year. Without those
reforms (market for goods and services, labour market, taxation, …), the growth in GDP will not be
permanent.
2.2.6. Monetary policy instruments
In a moderate growth and inflation environment, the Eurosystem adopted the following monetary
policy measures these last few years:
targeted long term refinancing operations (TLTRO) 13;
Asset Purchase Programmes or APP (quantitative easing)14;
Negative rates on deposits (aiming at inducing more accomodating conditions in
credits).
The World’s economic and financial environment (slowing of emerging markets adn weak inflation)
deteriorated early 2016 and led the ECB to strengthen the existing measures and to take new ones.
Indeed the Council of Governors has adopted the following measures :
13 Three-year credits lent to banks by the ECB, to help those to finance themselves and thus avoid a collapse of credit
that would be of great prejudice to the economic kickstart. Reinvesting the capital reimbursement of the APP for as long as necessary. 14 « Such asset purchases fall into the category of ‘unconventional’ or ‘non-conventional’ monetary policy, since they
are distinct from changes in policy rates. They are described as ‘quantitative easing’, as they lead to an increase in the quantity of money available in the economy. Asset purchases have proven highly suited to low interest rate environments, when policy rates are approaching their lower bound and traditional monetary policy thus reaches its limits. That said, their purpose is the same : to reduce the real cost of financing in order to boost economic activity and ensure price stability, the primary objective of monetary policy in the euro area. » in https://www.nbb.be/doc/ts/publications/economicreview/2016/revecoi2016_h2.pdf?language=fr, pp.1
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 22
lowering of all the rates (deposit facility rate to -0.40%, main refinancing operation to 0.00%
and marginal lending facility to 0.25%) ;
Chart 1 : The minimum bid rate for the main refinancing operations
Increase of the asset purchase programme APP (« quantitative easing ») : from 60 to
80 billions on a monthly basis (to the end of March 2017 and beyond if necessary) ;
Creation of a new bonds purchase programme (« Corporate Sector Purchase
Programme » - CSPP) within the APP concerning bonds of enterprises of the non-
financial sector established in the Eurozone;
Launch of four targeted longer term refinancing operations (TLTRO II) with a rate of
one every three months. Those 4-years loans could present a negativ eyield if the
banks which borrow increase themselves the volume of credits they grant to
entreprises and households.
The ECB expects these measures to produce a double effect :
a) influencing the markets anticipations regarding inflation and growth;
b) ensuring a low refinancing rate to the states, to enterprises and households.
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
4,00%
4,50%
5,00%
1999
-01
1999
-08
200
0-0
3
2000
-10
2001
-05
2001
-12
2002
-07
2003
-02
2003
-09
2004
-04
2004
-11
2005
-06
2006
-01
200
6-0
8
2007
-03
2007
-10
2008
-05
2008
-12
2009
-07
201
0-0
2
2010
-09
2011
-04
2011
-11
2012
-06
2013
-01
2013
-08
2014
-03
2014
-10
2015
-05
2015
-12
201
6-0
7
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 23
CHAPTER 3 : KEY FIGURES
3.1. TOTAL DIRECT DEBT OUTSTANDING (ST & LT)
The cumulative net borrowing as of 31 December 2016 amounted to € 2,688,012,306.78. It decreased
by € 62,363,359.39 (-2,27%) compared to 2015. This means that the Region has reduced its debt by
that amount in the year 201615.
Chart 2 : Total Direct Debt Outstanding 1991-2016 on 31 December (in million €)
The information given by the graph of the total direct debt outstanding remains incomplete. It only
informs the reader on the amount on 31 December of the year concerned. We can refine this data.
The evolution of the annual average outstanding provides a more realistic vision of the evolution of the
regional debt as based on 365 (or 366) observations.
15 Refer to part 5 chapter 2.1 for more information.
0
500
1.000
1.500
2.000
2.500
3.000
3.500
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Outs
tand
ing
20
16:
€ 2
.69 b
illio
n
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 24
Chart 3 : Differential between the annual average outstanding and outstanding on 31 December (in thousand €)
On 31 December 2016, the debt outstanding was € 62.36 million lower than at the end of 2015. The
average amount, that better reflects the situation, is lower by € 59.14 million than in 2015.
3.2. COST OF FUNDING16
The calculating basis of the daily cost of funding is "full costing" (Consolidated debt + floating debt +
revenue and expenditure from derivatives + FCCB effect17).
There is a parallelism between the average cost of the portfolio and the Euribor curve. The magnitude
of this correlation is weighted by outstandings of the variable and floating debts. The greater a part in
the portfolio these assets represent, the more the cost of funding of the portfolio approximates the
Euribor curve.
2016 has seen Euribor rates falling heavily on 31 December (in proportion of their maturity) and on
year’s average (in reversed proportion of their maturity).
16 History of cost of funding is in the appendix (Part 5 chapter 4).
17 The creation of the Financial Coordination Centre for the Brussels-Capital Region (FCCB) permitted to reduce the weighted
average cost of the portfolio. The debit position on the current account is indeed reduced by the creditor position of the FCCB regarding the calculation of the interest. The cost on December 31, 2016 was 3.9761% with the FCCB effect and 3.9857% without.
2.200 2.400 2.600 2.800 3.000 3.200
2013
2014
2015
2016
Outstanding on 31 december
Annual average Outstanding
Cost of fu
nd
ing 2
016:
3.9
8%
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 25
Table 5 : Evolution of the Euribor rates between 2015 and 2016
E3M E6M E12M
at 12.31.2015 -0.131 -0.040 0.060
at 12.31.2016 -0.319 -0.221 -0.082
Difference -143.51% -452.50% -236.67%
average 2015 -0.020 0.053 0.168
average 2016 -0.264 -0.165 -0.035
Difference -1228.96% -407.98% -120.55%
Chart 4 : Euribor rates 3, 6, 12 month maturities
The IRS rates have risen on yearly average in reversed proportion of their maturity.
Table 6 : IRS rates evolution between 2015 and 2016
IRS5Y IRS10Y IRS15Y IRS20Y IRS30Y
at 12.31.2015 0.326 0.998 1.396 1.564 1.606
at 12.31.2016 0.073 0.661 1.015 1.173 1.219
difference -77.73% -33.78% -27.29% -25.01% -24.10%
average 2015 0.338 0.878 1.191 1.329 1.389
average 2016 -0.008 0.508 0.853 0.989 1.028
difference -102.41% -42.12% -28.36% -25.59% -25.98%
-1,00
0,00
1,00
2,00
3,00
4,00
5,00
6,00
1/01
/200
8
1/01
/200
9
1/01
/201
0
1/01
/201
1
1/01
/201
2
1/01
/201
3
1/01
/201
4
1/01
/201
5
1/01
/201
6
3M
6M
12M
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 26
Chart 5 : IRS rates evolution between 2008 and 2015
The cost of the portfolio increased from 4.02% to 3.98% in 2016 (a decrease of 1.17%), despite a
important fall of short and long term rates, in reason of the choice by the Region for a highly defensive
risk profile for the portfolio:
the fixed-rate or hedged part of the portfolio was kept at a high level in 2016 (97.87%);
the loans in 2016 were taken with shorter durations than the previous years (9.50 years on
average)18.
The 2016 portfolio presents a rather low cost in regard to its highly defensive profile (with an almost
inexistent interest rate risk19).
18 Refer to part 3.1. chapter 4 for more information.
19 Interest rate risk is the risk associated with fluctuations in interest rates.
-1,00
0,00
1,00
2,00
3,00
4,00
5,00
6,00
1/01/2008 1/01/2009 1/01/2010 1/01/2011 1/01/2012 1/01/2013 1/01/2014 1/01/2015 1/01/2016
5Y
10Y
15Y
20Y
30Y
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 27
Chart 6 : Weighted monthly average cost of the Direct debt (2014-2016)
3.3. PORTFOLIO DURATION(S)
3.3.1. « Classic » duration20
The duration is defined as the ratio of the weighted present value of each cash flow to the present
value of all cash flows. It assesses the average risk of the portfolio on the basis of all discounted cash
flows (interest and amortization).
Flows of interest and amortization of fixed rate loans and derivatives have a high duration because
they are valued on the whole of their lives. In contrast, the flows of interest and amortization of
variable-rate loans and derivatives have a short duration because they are only valued up to their next
fixing dates. In other words, we take only into account the flows for which rates are known for certain.
The duration of the portfolio has shown various cycles, up or down. The longer the duration, the less
the rate risk becomes. Periods of increase correspond to consolidations and/or reduction of the
floating debt, and those of decrease, to loan repayments and/or increase of the floating debt.
The creation of the FCCB allowed increasing the duration of the portfolio by the cancellation of the
interest rate risk on a part of the floating debt.
The duration of the portfolio on 31 December 2016 was 9.65 years, one of the highest durations ever
reached by the Region on 31 December. It slightly decreased compared to 31 December 2015 (9.88
years). Positive effects on the duration such as the FCCB (+0.37 year) and the decrease of long term
interest rates (on December, 31) that positively impacts the present-valuation of financial flows (the fall
in interest rates does increase duration), could not completely compensate the slightly negative effects
induced by the decrease of the consolidated debt at fixed or protected rate from € 2.67 billion on 31
December 2015 to € 2.57 billion on 31 December 2016, and the increase of the outstanding at
20 History of the duration is in the appendix (part 5 chapter 5).
3,833,93 3,93
3,94
3,85 3,83
3,95
4,15 4,13
4,114,02
3,91
3,00
3,20
3,40
3,60
3,80
4,00
4,20
4,40
01 02 03 04 05 06 07 08 09 10 11 12
2014
2015
2016
Dura
tion 2
01
6: 9.6
5 y
ears
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 28
variable or floating rates (from € 81.6 million on 31 December 2015 to € 119.3 million on 31 December
2016).
To examine the performance of the debt portfolio, let’s take a closer look at two evaluation criteria,
Duration and Average cost (with FCFB effect) within the same graph.
To parallel the evolution of the duration to the cost of the portfolio allows indeed taking a critical look at
the optimization of the portfolio management (with regard to establishing the best cost / risk ratio).
Chart 7 : Evolution of duration (at end of month) and weighted monthly average cost (1998-2016)
During the last ten years, with a lower financing cost (4.13% in 2007 and 3.98% in 2016) the Region
has appreciably increased the duration of its portfolio (3.17 years in 2007 and 9.65 years in 2016),
thus reducing its risks on rates, liquidity21 and refinancing22.
3.3.2. Duration of funding
The duration of funding takes only into account the amortizations. It expresses the remaining duration
of our commitments in terms of funding. This indicator, unique to the Region, measures its liquidity
risk.
It decreased from 8.24 years at the end of 2015 to 7.84 years at the end of 2016.
3.3.3. Duration of rate
The duration of rate includes only interest flows. It expresses the remaining duration of interest flows
of loans and derivatives. This indicator, unique to the Region, measures its interest rate risk.
It decreased from 12.94 years at the end of 2015 to 12.79 years at the end of 2016.
21 Liquidity risk is the risk of not finding a funding at short, medium or long term in order to cover an existing or future deficit.
22 Refinancing risk is the risk that the region would be unable to repay loans contracted in previous years, as well as the interest
expense associated with them, because it can’t borrow the amount to be refunded.
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
10,00
12,00
0,00
2,00
4,00
6,00
8,00
10,00
12,00
31.0
1.9
831
.07
.98
31.0
1.9
931
.07
.99
31.0
1.0
031
.07
.00
31.0
1.0
131
.07
.01
31.0
1.0
231
.07
.02
31.0
1.0
331
.07
.03
31.0
1.0
431
.07
.04
31.0
1.0
531
.07
.05
31.0
1.0
631
.07
.06
31.0
1.0
731
.07
.07
31.0
1.0
831
.07
.08
31.0
1.0
931
.07
.09
31.0
1.1
031
.07
.10
31.0
1.1
131
.07
.11
31.0
1.1
231
.07
.12
31.0
1.1
331
.07
.13
31.0
1.1
431
.07
.14
31.0
1.1
531
.07
.15
31.0
1.1
631
.07
.16
Duration at end of month (in years) Weighted monthly average cost (%)
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 29
3.4. PORTFOLIO STRUCTURE
97.87% of the portfolio's total direct debt is at fixed, protected or neutralized rates.
Table 7 : Structure of the portfolio as of 31 December 2016
in € in %
Consolidated debt fixed rate 2,482,250,000.00 92.35 %
Consolidated debt variable rate
(protected)
0.00 0.00 %
Floating debt - Protected (FCCB) 148,466,494.38 5.52 %
Fixed, protected & FCCB effect 2,630,716,494.38 97.87 %
Consolidated debt variable rate 90,000,000.00 3.22 %
Floating debt 119,262,306.78 4.43 %
Floating debt protected (FCCB) -148,466,494.38 -5.52 %
Variable rate & effect FCCB 57,295,812.40 2.13 %
TOTAL 2,688,012,306.78 100.00 %
In keeping the fixed/hedged part of its portfolio at a high level (97.87%), the Region has kept low its
risk on interest rates.
Chart 8 : Evolution of the structure of the debt on 31 December 2015 (left) and on 31 December 2016 (right)
Fixed
Hedged / Capped
FCCB
Variable
Floating
Fixed
Hedged / Capped
FCCB
Variable
Floating
Port
folio
str
uctu
re 2
01
6: 9
7.8
7%
Fix
ed a
nd p
rote
cte
d
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 30
3.5. DEBT BURDEN
The debt burden is the ratio of interests disbursed by the Region from which debt revenue was
subtracted over the total regional budget expenditure. The interests amounted to more than € 104
million for 2016. This represents 2.33% of the total expenditure of the Region.
3.6. MARK TO MARKET RISK
Starting in 2014, the market rate sensitivity is now computed by the Front Office (formerly given by
Belfius Bank), the computations are based on zero-coupon rates.
Table 8 : Evolution of the regional portfolio's sensitivity
year sensitivity (total)
2014 5,338,334.44
2015 4,861,740.54
2016 5,441,277.00
The table below shows the exposition of the direct debt (and linked swaps) to the market interest rate.
This risk is spread over different interest rate maturities (first column to the left).
From a practical point of view, the table shows the change (in euro) of the Brussels Region's financial
liabilities in case of a basis point (1bp=0.01%) change in interest rate (zero-coupon) for a specific
maturity. A positive amount means, for a decrease of 1 basis point in the reference rate, an increase
of the value of the Region's financial liabilities.
The market rate sensitivity is shown for the loans and the derivatives with non-structured rate (i.e more
than 90% of the direct debt and the linked derivatives in nominal terms), the "total" column shows the
sum of the two.
Debt
burd
en 2
016 :
2.3
3%
of exp
en
diture
s
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 31
Table 9 : Market rate (zero coupon) sensitivities at 31 December 2016
Rate
maturity
Total Loans IRS (callable
included)
6M 9,088.00 37,392.00 -28,304.00
1Y 16,747.00 3,672.00 13,075.00
2Y 39,759.00 33,728.00 6,031.00
3Y 35,226.00 7,965.00 27,261.00
4Y 70,732.00 39,741.00 30,991.00
5Y 105,734.00 92,385.00 13,349.00
6Y 158,205.00 139,635.00 18,570.00
7Y 41,593.00 29,506.00 12,087.00
8Y 78,188.00 81,934.00 -3,746.00
9Y 155,343.00 75,719.00 79,624.00
10Y 94,703.00 43,383.00 51,320.00
11Y 156,057.00 168,550.00 -12,493.00
12Y 78,566.00 70,237.00 8,329.00
15Y 962,940.00 744,815.00 218,125.00
20Y 540,192.00 255,980.00 284,212.00
25Y 725,003.00 29,472.00 695,531.00
30Y 381,584.00 -7,249.00 388,833.00
35Y 266,404.00 -42,274.00 308,678.00
40Y 1,271,952.00 -2,012.00 1,273,964.00
50Y 253,261.00 - 253,261.00
60Y - - -
Total 5,411,277.00 1,802,579.00 3,638,698.00
3.7. DEBT SERVICE COVERAGE RATIO
Since the beginning of 2012, Standard & Poor’s evaluates the available liquidity of the Brussels-
Capital Region through the debt service covering ratio for the next 12 months, taking into account only
the liquidity facilities that are certain. This ratio must exceed 120% for Standard & Poor’s to review the
level of liquidity as positive.
To diminish this risk on liquidity, the Debt Agency has pursued a strategy of consolidating the direct
debt, starting from a 49.27% ratio in June 2012 to reach 431.45% in December 2013. The Agency has
seen to keep this ratio high enough ever since.
The new regional cashier’s contract stipulates a short term credit line of € 1.5 billion beginning on
01/01/201423. The ratio should attain 313.36% at the end of 2017. This translates in a very positive
level of liquidity in the analysis grid of Standard & Poor’s.
23 Refer to part 3.1. chapter 5.11. for further information.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 32
Table 10 : Debt service coverage ratio
31.12.2016 31.12.2017 (projection)
1. Cash available on Current account24 1,418,374,334 1,014,237,693
2. Debt service25 261,322,103 325,665,294
3. Debt service coverage ratio S&P 546.95% 313.36%
CHAPTER 4 : LONG-TERM DEBT
Those last three years, the Region has reduced its debt by € 458.1 million (2013-2016). It induced a
major decrease in the direct debt. Due to the probable positive impact on the direct debt portfolio of
the balance of public finances, the Region decided to plan a limited reconsolidation strategy since
2013. It means that amongst the loans reaching their maturity dates, only those coupled with
derivatives will be refinanced.
4.1. REGIONAL STRATEGIES 2016
4.1.1. Sources of funding 2016
The Brussels-Capital Region seeks constantly to diversify its financing channels. It was not the case in
2016 because it entered into only two funding agreements for an amount of € 50 million for the
aforementioned reasons. 100% of it was made via the MTN programme. There was no other funding
under the schuldschein format, bilateral or non-bilateral bank loans. 100% of the long-term financing
was done with foreign investors.
Chart 9 : Funding 2016 by source (left) and origin (right)
24 Regarding the annual projection, availaible amount on current account doesn’t take into account placements and funding with a maturity less than a year.
25 The Debt Service is the total amortizations and interests paid in the next 12 month.
Schuldschein
MTN
Bank
Other Bilateral
belgian
foreign
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 33
The Region seeks not only to diversify its funding formats but also to diversify the nature and origin of
its investors. There are thus public and private investors (banks, savings banks, pension funds,
insurance companies, holding companies). In addition, the Debt Agency is authorized since 2012 to
enter into financing operations through direct agreements with non-bank counterparties.
4.1.2. Funding and margins in 2016
The Region has conducted two long term consolidations for a total amount of € 50 million at an
attractive level via the MTN programme. The average duration of funding is 9.5 years.
Chart 10 : Long term funding source in 2016 (mean maturities)
The average margin on loans amounted to 5.6 basis points compared to IRS and 15 basis points
compared to OLO.
4.1.3. Sources of funding and margins between 2009-2016
The Region entered into 86 financements since 2009 for a total amount of € 2.78 billion.
The average duration of funding is 12.4 years.
The average margin on loans amounted to 94 BPs compared to IRS and 36.5 BPs compared to OLO.
0 2 4 6 8 10
Schuldschein
MTN
Bank
Other Bilateral
Mean
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 34
Chart 11 : Funding source : by amount (left) and by average duration (right)
4.2. ACTIVE DERIVATIVE PRODUCTS ON 31 DECEMBER 2016
There were two transactions in 2016 for an amount of 40 million €.
The region has as of 31 December 2016 € 1.96 billion of derivatives concluded with 11 banks.
Hereafter the breakdown by bank and by product category:
Chart 12 : Derivatives breakdown by bank (left) and by product category (right)
1090,5
1166,3
467,5
50,0
Schuldschein
MTN
Bank
Other Bilateral
0 2 4 6 8 10 12 14 16 18
Schuldschein
MTN
Bank
Other Bilateral
Mean
B01
B02
B03
B08
B09
B11
B12
B13
B15
B16
B17
B19
simple swap
swap callable
slope swap
inflation cap
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 35
4.3. COUNTERPARTY RISK
Counterparty risk results from the uncertainty of a counterparty to meet its financial obligations vis-à-
vis the Region. The Region has developed an evaluation grid for the quality of its counterparties based
on their ratings, one for its funding and another for its derivatives.
The graphs below illustrate the excellent quality of the counterparties with which the Region deals.
Chart 13 : Rating of banking counterparties by funding (left) and by derivative (right)
CHAPTER 5 : SHORT-TERM DEBT
Those last three years, the Region has reduced its debt by € 458.1 million (2013-2016). This reduction
of the debt made completely disappear the initial floating debt (the Region’s cash position is positive
throughout the year) and leads today to a particularly defensive portfolio. Due to the probable positive
impact on the direct debt portfolio of the balance of public finances, the Region hopes to gradually
replenish a floating debt and therefore benefit from his line of credit (€ 1.5 billion) while maintaining a
balanced and defensive portfolio.
5.1. MANAGEMENT TOOLS
With time, the Region has developed management tools that allowed it to minimize its risk on liquidity.
A+
A
A-
BBB+
BBB
BBB-
A+
A
A-
BBB+
BBB
BBB-
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 36
5.1.1. Cashier’s contract
Following the new European tender initiated in 2013, Belfius Bank26 was chosen as the Region’s
cashier for the period from January 1st 2014 to March 31st 201827. Belfius Bank is the Brussels-Capital
Region’s cashier since January 1st 1999.
The cashier’s missions, besides the day-to-day management of accounts, exclusively consist in the
opening of credit facilities for daily deficits and surpluses as well as the financing (existing MTN
program excepted) or investment (excepted commercial paper) operations up to a duration of 30 days
(calendar) and for commercial paper for a maximum duration of 7 days.
Until December 31 2013 the Region had a cash line of € 500 million at its disposal, with a negative
margin of 4 basis points on the monthly average rate of the 1-week maturity Euribor. Given the
increased risk on liquidity since the financial crisis of 2009, the Region had to have a more solid cash
credit line at its disposal. The Region, with this tender, has obtained for the years 2014 to 2018 a cash
credit line amounting to € 1.5 billion, triple the previous amount, this with sensational margins without
reservation commissions :
on the 500 first million €, the negative margin is 6 BP under Eonia ;
on the 500 to 750 million € slice, the margin is flat on Eonia;
on the 750 million to 1.5 billion € slice, the margin is 50 BP over Eonia.
It is clear that the line from € 750 million to € 1.5 billion won’t be used often, but it allows to appreciably
reduce the short term risk on liquidity of the Region. Besides, the Region could without any risk let its
floating debt grow to a fairly high level and thus greatly reduce the cost of its debt portfolio.
5.1.2. MTN program
In addition to the aspect of credit facilities, the Brussels-Capital Region has at its disposal lines of
fixed-term advances (more than 30 days - ATF) with various banks and it entered on April 3, 2009 in a
Medium Term Note program (MTN) for short- and long-term operations (1 day to 50 years maturity)
with a € 3 billion capacity on January 1, 2014.
Originally this MTN program included the commercial paper program (treasury bills - BT) that existed
previously for short-term (1 day to 1 year) operations only. The BT program was increased from 250 to
€ 500 million on 1 June 2005, to € 700 million as of November 1, 2008, to € 2 billion as of June 16,
2010, and finally to € 3 billion as of January 1, 2014.
On 16 June 2010, the Region has set up a new MTN program now open to competition between 4
dealer banks (BNP Fortis, Belfius, KBC and ING). Dealers "of the day" may be added for specific
operations. The program has been used for up to € 874.25 million in 2016.
The 1 January 2014 update of the MTN program is not limited to the increase in capacity from 2 to 3
billion. It consists among others in :
26 Belfius Bank was called Dexia BanK until June of 2012.
27 In the case of a change of provider for the next cashier contract, the tenderer (Belfius Bank) shall ensure the remaining deliveries from the actual cashier contract for a six months period after its end.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 37
the possibility to get the commercial paper listed, by default on Euronext Brussels, on
demand of investors (it is a legal requirement for some investors to do business with);
the simplification and harmonization of the fees grid. The fee system is now aligned on that
of the Schuldschein contract, meaning the same margin for the dealer whatever the format.
The final choice ends up with the investor;
the revision of administrative costs of the program to lower levels;
the creation of a more flexible competition system for the bids when the Region is the one
asking for emission;
bids are in competition for treasury bills of less than a month (no more exclusivity of the
cashier).
The MTN program has been made more dynamic, competitive and flexible while being much less
onerous than before and has widened field of operations on the short term.
5.1.3. Short term debt : composition and financial cost
No treasury bills were emitted in 2016.
Chart 14 : Weighted monthly distribution (number of days in month) of the floating debt in 2016
-150.000.000
-100.000.000
-50.000.000
0
50.000.000
100.000.000
150.000.000
2016
-01
2016
-02
2016
-03
2016
-04
2016
-05
2016
-06
2016
-07
2016
-08
2016
-09
201
6-1
0
2016
-11
2016
-12
Placements
Outstanding FTA
Outstanding CP
Checking account
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 38
All the interests of the short-term debt (less than a year) actually accrued in the year 2016 amounted
to € 21,774.41.
Table 11 : Accrued financial charges in 2016 in € for the short-term debt(< 1 year)
Via short-term bank financing (<30 days)
Debit Interest on current account 50,794.27
Debit interest on Fixed-Term Advances (ATF) 0.00
Via euro deposits (> 30 days):
Debit interest on euro deposits 0.00
Transaction costs on euro deposits 0.00
Via MTN program:
Transaction costs on MTN 45,508.68
Debit interest on paper (BT) -3,952.60
Transaction costs on paper (BT) 1,831.49
Via credit interest :
Credit Interest on current account 0,00
Credit interest on paper (BT) -72,404.43
Total 21,777.41
Interests on the current account are calculated as described in part 5.1.1 of the present chapter. They
are charged for the following month.
Interests on fixed-term advances (ATF) and on euro deposits (private placements) are charged at the
redemption date. It may therefore that these interests can be put on the following financial year.
Interests on paper fall into discounted interests (€ -3,952.60) and transaction costs (€ 1,831.49). The
discounted interest is paid on the issue date. They are therefore charged the same year. Transaction
costs are paid via a monthly bill (issued by the market maker) 10 to 12 weeks after the end of the
month. Some of these are thus charged on the next accounting period.
Sometimes the Region presents a positive balance on its current account. It becomes in turn lender
either through the current account (€ 0.00) or via the purchase of paper (€ 72,404.43). The strategy
was to manage those short term investments to the best by :
diversifying investment channels (current account, …) ;
diversifying investment length (one week, one month, two month, …) ;
minimizing the counterparty risk (investment in public sector) ;
often being exempted of the 25% withholding tax (in the case of an investment in the public
sector).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 39
5.2. TREASURY BILLS (<1 YEAR)
The paper program of the Brussels-Capital Region, which is included since April 3, 2009 in the MTN
program, is characterized by :
ongoing program
Maximum amount: € 3,000,000,000 since 1 January 2014
dematerialized
clearing: National Bank of Belgium
multiples of € 25,000 with a minimum of € 625,000 by issuing
maturities: 1 day to 1 year
tax regime: under the Royal Order of 15 December 1995
market maker: Belfius Bank
This program provides many benefits to the issuer, the Brussels-Capital Region:
originally diversification of financial short-term instruments
low-cost financing
flexibility
guaranteed liquidity
suits the needs in cash management
possible use of derivatives
The advantages are significant for investors as well:
high return, higher than treasury certificates
no withholding tax for investors in the public sector
efficient secondary market
short-term product diversification
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 40
suits their needs in cash management
rating AA
Usually, we distinguish the annual volumes of paper issued (nominal value) and the annual weighted
averages (average annual outstanding). We can’t do it this year as the Brussels-Capital Region hasn’t
emitted any treasury bill in 2016.
Chart 15 : Annual issuance volume of CP (treasury bills) at nominal value
Chart 16 : Annual average outstanding of CP (treasury bills) 2001 - 2016
0
1.000.000.000
2.000.000.000
3.000.000.000
4.000.000.000
5.000.000.000
6.000.000.000
7.000.000.000
8.000.000.000
9.000.000.000
10.000.000.000
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
200
9
201
0
201
1
20
12
20
13
20
14
20
15
20
16
0
50.000.000
100.000.000
150.000.000
200.000.000
250.000.000
300.000.000
350.000.000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 41
CHAPTER 6 : FINANCIAL COORDINATION CENTRE (FCCB)
6.1. INTRODUCTION
6.1.1. History and missions
On 3 December 2003, the Government of the Brussels-Capital Region decided to create a Financial
coordination centre (FCCB), as well as its general principles of operations. On 19 February 2004 the
ordinance creating the FCCB was voted by the Brussels Parliament. The FCCB was to be a service of
the Ministry, and be part of the Administration of Finance and Budget.
The ordinance provided for the participation of 13 regional institutions. They have to this day all joined
the coordination centre, with the exception of the Brussels Regional Funds for the Refinancing of the
Municipalities Treasuries – but the ordinance provided only for a partial participation anyway so the
financial impact is limited.
With the ordinance of 23 February 2006 on the applicable provisions regarding budget, accounting
and control, the FCCB became a fully integrated tool of financial management for the Region. This
ordinance stipulates that every Autonomous Administrative Institution (OAA) will be, by law, integrated
in the FCCB.
Thus BRUGEL, Brussels regulator of the energy market, as well as the NPO IRISTeam joined the
FCCB on January 1st and July 1st, respectively. In 2013, two new institutions joined the FCCB : the
Brussels Parking Agency on July 1st, and the Housing Fund on October 1st. The Regional Agency for
Commerce (Atrium) has joined the FCCB on April 1st 2015 and visit.brussels on April 1st 2016.
The general principles of FCCB operations :
centralization of the participating institutions’ treasuries, via a notional cash pooling;
”just in time” financing of the institutions’ expenses, through a system automatically
transferring the funds from their transit account to their own account;
making of a consolidated treasury plan based on the individual treasury plans of the
institutions;
evaluation by the FCCB of the level of smoothing of the financial fluxes of the institutions, as
well as the quality of their treasury forecasts.;
calculation and allocation of an annual subsidy for good financial management;
respect of the autonomy of the institutions, but advice given by the FCCB regarding the
improvement of their financial management.
The creation of the FCCB generates two gains : first, through the notional cash pooling, the financial
centralization allows to gain on the intermediation margins. Second, it improves the global structure of
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 42
the regional debt portfolio, and reduces its cost postponing the need to consolidate it through long
term loans, without any risk on interest rate.
Regarding the operational aspects, the FCCB functions optimally : in coordinating de cash flows of the
institutions, centralizing the treasuries and making consolidated treasury plans with a view on the best
management of the regional floating debt.
Moreover, the internally-developed IT procedures are efficient and the cooperation with the institutions
and the regional Cashier is excellent.
The FCCB also produces quality financial reports : from monthly reports to the Minister of Finance and
Budget to quarterly activity reports for each institution (including an annual activity report) and an
annual activity report of the FCCB itself, now included in the present annual report of the Brussels
Regional Debt Agency.
6.1.2. Outlook 2016
The year 2017 began, already on 1st January, with the integration of two new institutions : the
Brussels Planning Bureau (BPB) and Brussels Prevention & Security (BPS). The integration of those
two organisms was made to happen at the same time as their entry in the SAP-Platform.
Section 99 of the Ordinance containing the general budget of the Brussels-Capital Region
expenditures for fiscal 2017 provides also for the integration of Brussels Dismantling and
beezy.brussels.
Another important project is in progress. It is the merger of the two non-profit organizations Impulse
and Atrium with Brussels Invest & Export, a former service of the Regional Public Service Brussels.
This project will be realized in 2017 through an Order establishing a new institution : the Regional
Agency for Enterprise and Trade (RAET), that will begin on January 1st of 2018. A participation
agreement will be signed with the RAET. The existing agreements with Impulse and Atrium will remain
of application until their liquidation.
6.2. DESCRIPTION
6.2.1. Operations
6.2.1.1. Notional cash pooling
Notional cash pooling is a treasury management technique allowing to optimize management of
liquidities on multiple accounts without having to actually transfer funds from one account to another.
Total debit and/or credit interests are thus calculated on basis of the global balance of this grouped
account (a fictive entity), and isn’t the sum of debit and/or credit interests calculated on each individual
account anymore.
The cash pooling further allows to gain the intermediation margins of the banks between debit and
credit interests.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 43
To the cash pooling system implemented with the creation of the FCCB, some mechanisms are
added :
the accounts of the Region and those of the participating institutions are grouped within a
fictive account on which balance the Region pays or receives the interests. The institutions
renounce their rights to receive interests on their accounts, that are integrated in this
ensemble.
the account owned by the institution that it chose as its « main account » can’t drop below
0. To achieve this, a system of automatic transfers from the regional accounts (namely the
transit accounts which the subsidies for the institutions are transferred on) to the main
accounts is taken care of by the cashier so that the balance is kept at 0, if necessary.
Consequently an expense of an institution is blocked by the cashier if the amount (taking
into account the receipts of the day on the main account) is greater than the total balance of
transit account and main accounts).
6.2.1.2. Effects of the cash pooling on the financial management of the Region
Beyond the gain on bank intermediation margins, the cash pooling has a sensible effect on the
financial management of the Region :
impact on treasury management
Before, the subsidies were transferred on the institutions’ own accounts, in the (more of
less long) wait of the real exposure of their expenses. This method led to institutions being
forced to invest their subsidies in order to get better creditor interests (compared to a sight
account) for the duration of the wait. This placement was nevertheless at worse conditions
than those obtainable by the Region.
The Region, on its side, must finance the payment of the subsidies and thus pay debit
interests to its cashier.
Presently the subsidies stay for a maximal duration on the transit accounts of the Region,
and those see movement only at the time when the expense really occurs. The floating
debt now varies at the same pace as the effective expenses of the institutions.
impact on the regional debt
The creditor balances of the institutions form a hedge for the regional debt risk on the
variation of interest rates.
The portfolio’s structure is thus modified, which allows, at risk kept equal, to postpone the
consolidation of the floating debt through long term loans, and reduce the average cost of
the regional debt.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 44
6.2.2. FCCB structure
Table 12 : 20 regional institutions are participating in the FCCB
Agence Bruxelloise pour l’Entreprise Impulse
Agence du Stationnement de la Région de Bruxelles-Capitale ASR
Agence Régionale du Commerce Atrium
Agence Régionale pour la Propreté ARP
Bruxelles Gaz Electricité BRUGEL
Bruxelles Prévention & Sécurité BPS
Bureau Bruxellois de la Planification BBP
Centre d'Informatique pour la Région Bruxelloise CIRB
Conseil Economique et Social CES
Fonds du Logement Fonds
Institut Bruxellois pour la Gestion de l'Environnement IBGE
Institut d'Encouragement de la Recherche Scientifique et de l'Innnovation de Bruxelles INNOVIRIS
IRISteam ASBL IRISteam
Office Régional Bruxellois de l'Emploi Actiris
Service d'Incendie et d'Aide Médicale Urgente SIAMU
Société de Développement pour la Région de Bruxelles-Capitale CityDev
Société des Transports Intercommunaux de Bruxelles STIB
Société du Logement de la Région Bruxelloise SLRB
Société Régionale du Port de Bruxelles Port
Visit.brussels Visit.brussels
Their participation can be analyzed through two characteristics :
impact on the consolidated treasury plan
Importance of the financial flows on the bank accounts allows to determine the impact of
the institution on the treasury plan of the FCCB and thus the influence of its individual
treasury plan on the management of the regional floating debt.
contribution in treasury
Comparing their financial balances allows to see their relative importance in terms of
treasury.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 45
Chart 17 : Distribution of total movements in 2016
Chart 18 : Distribution of the average outstanding of own and transit accounts in 2016
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 46
6.2.3. Financial data 2016
A. Evolution of the global financial outstanding of the FCCB :
Table 13 : Evolution of the global financial outstanding of the FCCB
Outstanding in EUR 2013 2014 2015 2016 2017 (on 21/05)
1. Own accounts 63,274,692.46 86,275,033.88 83,338,830.15 77,440,304.77 124,828,335.09
2. – end of period 89,078,341.54 71,090,848.16 136,229,459.50 148,678,893.47 103,071,364.13
3. Transit accounts 611,978,316.70 713,367,605.60 805,595,369.22 1,071,474,554.12 1,026,157,135.21
4. – end of period 507,677,238.46 808,570,305.51 758,801,701.15 845,234,202.97 1,110,352,460.49
5. Total 675,253,009.16 799,642,639.48 888,934,199.36 1,148,914,858.90 1,150,985,470.30
6. – end of period 596,755,580.00 879,661,153.67 895,031,160.65 993,913,096.44 1,213,423,824.62
Chart 19 : Evolution of the global financial outstanding of the FCCB
The average total outstanding 2016 has increased compared to that of 2015. He went indeed from €
888,934,199.36 to € 1,148,914,858.90.
This confirms anew the trend that transit accounts are debited only at the moment of the effective
expense, the subsidies thus staying for a maximum duration in the Region financial perimeter.
The following chart illustrates the evolution of the net financing needs outstanding of the institutions for
2017, subsidies excluded. This outstanding increases regularly over the period, which facilitates the
making of valid treasury plans.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 47
Chart 20 : Evolution of the net financing needs outstanding of institutions for 2017
B. Quality of the FCCB treasury plan
The 4-weeks treasury plans provided each week by the participating institutions are consolidated and
forecasts on the own accounts and transit accounts are established for the next 28 days. These
forecasts are fundamental to the management of the regional floating debt.
The individual and consolidated plans are evaluated with the same method : a deviation is calculated,
determined by the difference between planned net movement and real net movement, divided by the
total of debit and credit movements, and this on a daily basis.
The quality of its individual plan allows the institution to get greater subsidy for good financial
management (bonus from 5 to 25 BP on the yearly average outstanding).
The quality of its consolidated plan is an indicator of the quality of its service in regard to the
management of the floating debt by the Directorate of Treasury, and the target has been set at 15%.
The quality of the FCCB treasury plan improved sensibly in the first years of operations and the 15%
target was reached in 2007. In 2009 and 2010, the making of trustworthy plans by the institutions was
made more difficult due to “conservatory measures” on the budget. 2016 has shown a sensible
increase of the deviation (17.89%). This augmentation can be explained by exceptional events.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 48
Chart 21 : Evolution of quality – treasury plan FCCB
Reasons for the quality of the FCCB treasury plans are many :
the deviations are analyzed and grouped by category by the FCCB. This analysis is
communicated to the institutions in the form of quarterly reports and/or during informative
meetings initiated by the FCCB or the institutions. In many cases, the advice given by the
FCCB to the institutions allows them to improve the quality of their treasury forecasts.
the proactive attitude of some institutions, which have modified their internal processes in
regard to the payment of their suppliers in order to better control the timing of their
expenses.
C. Subsidies to the institutions
The participating institutions get a subsidy for their good financial management as provided for in
bilateral contract with the FCCB. Those are based on their cash contribution, and for a smaller part on
the quality of their treasury plans.
In 2016 (budget 2017), the amount of subsidies paid to the institutions was € 1,270,395.27.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 49
The table below shows the distribution of the subsidy.
Table 14 : Distribution of the subsidy for good financial management
Institution Smoothing
Quality Quality of forecasts
Total subsidy
Impulse € 0.00 € 0.00 € 0.00
ACTIRIS € 0.00 € 38,332.53 € 38,332.53
ARP € 0.00 € 114,037.48 € 114,037.48
ASR € 0.00 € 0.00 € 0.00
ATRIUM € 0.00 € 0.00 € 0.00
BRUGEL € 0.00 € 9,523.10 € 9,523.10
CES € 0.00 € 0.00 € 0.00
CIRB € 0.00 € 18,973.76 € 18,973.76
Fonds_Log € 0.00 € 225,327.73 € 225,327.73
IBGE € 0.00 € 37,579.33 € 37,579.33
IRISteam € 0.00 € 0.00 € 0.00
INNOVIRIS € 0.00 € 1,435.97 € 1,435.97
CityDev € 0.00 € 39,534.68 € 39,534.68
SIAMU € 0.00 € 25,550.48 € 25,550.48
SLRB € 0.00 € 0.00 € 0.00
Port € 0.00 € 49,484.88 € 49,484.88
STIB € 0.00 € 710,615.33 € 710,615.33
visit.brussels € 0.00 € 0.00 € 0.00
Total € 0.00 € 1,270,395.27 € 1,270,395.27
6.3. REGIONAL GAIN
Postponing the consolidation of the regional floating debt.
The regional debt portfolio is managed by the Brussels Regional Debt Agency, in the Brussels
Finance and budget.
The portfolio risk structure is a determining factor of the management. So the floating debt, that is the
most impacted by the variation of short term rates, must be consolidated through a long term loan if its
importance in proportion of the portfolio reach too high a level. This to fix the risk and maintain a
portfolio structure in the limits set by the Debt agency with the assent of the Minister of Finance and
Budget.
The creation of the FCCB has had a positive effect on the risk structure of the regional portfolio. The
contribution in treasury of the participating institutions does indeed neutralize the risk on interest rate
for the same amount.
Since 2005 –the first complete year of operations for the FCCB- the contribution in treasury of the
participating institutions through the cash pooling has allowed the Region to postpone (avoid)
consolidations which cumulated amounts are estimated at € 1.09 billion.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 50
The total amount of subsidies for good financial management paid for year 2016 (budget 2017) on the
February 28th 2017 is € 1,270,395.27.
The regional « financing cost » of these subsidies, compared to the contribution in treasury of the
FCCB (€ 1,095,740,690), is 0.116%.
This contribution in treasury has thus allowed the Region to avoid consolidation of its floating debt for
a total amount of € 1.09 billion at an estimated rate of 2.016%, representing a gain of 1.900% that is €
20,814,633.59 for 2016.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 51
3.2. PERSPECTIVES
CHAPTER 1 : AMORTIZATION SCHEDULE
The amortization schedule shows the amount of outstanding capital of the Region for each maturity.
The amortization schedule is an indicator of liquidity, refinancing and interest rate risks. If a public
entity or a company is facing difficulties in finding sources of financing or refinancing, they will face
liquidity and refinancing risk. The more important the funding and refinancing requirements will be, the
more reluctant the banks will be to grant a loan, let alone on favourable terms. This will induce an
interest rate risk and will affect the borrower by a higher cost of financing through higher bank margins
on the reference rate (Euribor, IRS, OLO).
In order to reduce these risks, the Region strives to best smooth its repayment plan. This reduces the
concentration of capital repayments and consequently improves the conditions for the financing and
refinancing of the Region.
Chart 22 : Amortization schedule of the consolidated debt (2017-2021)28
The calculation of the amortizations volatility 29 around the average is the main tool available to the
Region to reduce its liquidity, refinancing and interest rate risks. Low volatility means perfect
smoothing of the amortization schedule. This is considered by the Region a priority objective to
achieve:
28 The complete depreciation plan is to be found in the annexes (Part 5 Chapter 8).
29 The analysis of volatility allows measuring the amplitude of variation of each amortization around the amortizations’ average.
0
50.000.000
100.000.000
150.000.000
200.000.000
250.000.000
2017 2018 2019 2020 2021
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 52
the Region standard deviation over average ratio shows that the dispersion of future
amortizations is close to zero:
Year Average Expressed on Standard deviation
Standard deviation /
average
2017 20.00% 5 jaar 2.38% 11.88%
this is demonstrated by the constant slope of the curve :
Chart 23 : Cumulated amortizations of the consolidated debt (2017-2021)
CHAPTER 2 : NEW FINANCING AND REFINANCING REQUIREMENTS
In order to properly assess regional interest rate and liquidity risks, the future financing requirements
that could result from the authorized budget deficits issued by the "Public sector borrowing needs"
section of the High Council of Finance (HCF) should be integrated in the analysis.
This aforementioned Section may issue an opinion, on its own initiative or at the request of the
Federal Minister of Finance, as to whether to restrict the borrowing capacity of one or more
government levels, depending on the need:
to avoid compromising the economic and monetary union;
to avoid a structural skid in financing needs.
21,39%
42,62%
62,69%
84,13%
100,00%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2017 2018 2019 2020 2021
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 53
For the forecasts from 2017 to 202130 , the deficits authorized by the Brussels-Capital Region
Government31 amounted to € 0 for the whole period. Total financing requirements amount to €
380,000,000 taking into account the codes 832 (€ 225,000,000) and the non-budgeted investments33 (€
155,000,000). Refinancing needs for the same period amount to € 960,750,000. Financing
requirements and refinancing needs amount to € 1,340,750,000.
By integrating future authorized deficits, a standard deviation over average ratio of 29.74% is obtained
for a 5 year period. Including codes 8, the ratio increases to 9.62%.
Chart 24 : Financing and refinancing requirements (2017-2021)
30 Parliament of the Brussels Capital Region, Budget of ways and means for budget year 2017, Exposé général (A-425/1-
2016/2017), p.218 et 219.
31 The Brussels-Capital Region confirms this objective to be consistent with the stability programme (2016-2019) approved by
the Council of Ministers of the federal government on April 29th 2016. This programme Ce programme was the subject of concertation between the Communities and the Regions. 32 Budget items categorized with code 8 (Lending and stock investments) are considered by the ESA2010 as financial
transactions. They have no impact on the budget and are therefore not taken into account in the calculation of the balance of net financing of the Region. They come in addition to the net budgetary balance. 33 The Brussels Capital Region doesn’t take into account in its budgetary targets the necessary investments, and of great
expense, for the tunnels such as the Leopold II tunnel and the Tunnel of the Gate to Halle, as well as the expenses for the transformation and expansion of the subway network, that are the most important investments of the Region, and having the most impact on mobility. In Parlement de la Région de Bruxelles-Capitale, Budget des recettes et des dépenses pour l’année budgétaire 2017, Exposé général (A-425/1-2016/2017), p.219.
0
50.000.000
100.000.000
150.000.000
200.000.000
250.000.000
300.000.000
350.000.000
400.000.000
450.000.000
2017 2018 2019 2020 2021
Refinancing
News deficits (HCF norms)
News deficits (codes 8)
News deficits (non-budgetedinvestments)
Total
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 54
CHAPTER 3 : EVOLUTION OF DIRECT DEBT STRUCTURE WITH FCCB AND
CONSOLIDATIONS
Taking into account the FCCB and future consolidations (fixed rate), the fixed rate structure (fixed +
caps + FCCB) of direct debt is expected to range between 64.89 and 84.74% between 2017 and
2021. The variable rate structure (variable + floating - FCCB) should be between 15.26% and 35.11%.
We see hereafter the amounts of consolidation that should have taken place by the end of 2021:
Table 15 : Refinancing and new financing (2017 - 2021)
Year Refinancing New funding (HCF, codes 8 and
non-budgeted investments)
2017 205,500,000 200,000,000
2018 204,000,000 45,000,000
2019 192,750,000 45,000,000
2020 206,000,000 45,000,000
2021 152,500,000 45,000,000
Chart 25 : Change in the structure of the Direct debt, including the FCCB and the Fixed rate consolidations (31.12.2017 - 31.12.2021)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1/01/2017 1/01/2018 1/01/2019 1/01/2020 1/01/2021
Fixed & capped rates including FCCBwith consolidations
Variable & floating rates includingFCCB with consolidations
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 55
CHAPTER 4 : FUTURE COST OF PORTFOLIO (2017-2021) - STRESS TEST34
The Debt Agency of the Brussels-Capital Region developed an internal model of the evolution of the
cost of the regional debt portfolio over a period of five years. This model is based on the evolution of
the forward rate curve and integrates future consolidations in both fixed and variable rates. The model
focuses on five macroeconomic scenarios:
actual future rates;
economic recovery with rising inflation (higher future rates aimed at reducing inflation);
economic stagnation (lower future rates, which aims to boost economic growth);
high residual inflation with prospect of an economic slowdown (inverted curve);
economic growth without inflationary pressure (steepening of the yield curve).
On each macroeconomic scenario are applied four types of strategies of consolidation:
no consolidation;
defensive consolidations (100% fixed rate);
neutral consolidations (50% fixed and 50% variable rate);
aggressive consolidations (25% fixed and 75% variable rate).
Table 16 : Macroeconomic scenario of future real rates with defensive consolidations
Weighted average annual cost (end of month)
Year Defensive consolidations
2017 3.61%
2018 3.17%
2019 3.01%
2020 3.03%
2021 3.07%
The update was made with the rates from 10 April 2017 (steepening forward Euribor rates between
2019 and 2021, and forward IRS rates between 2018 and 2021). Note the expected decrease of the
cost of the portfolio over five years.
34 Exercise consists in simulating extreme but credible rate levels in order to study the impact on the portfolio. The aim is to measure the resilience of the portfolio to cope with such situations.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 56
CHAPTER 5 : REGIONAL STRATEGIES 2017
The Brussels Capital Region will pursue its 2016 strategy of constituting a significant level of floating
debt (debt at less than a year maturity). Like in 2015 and 2016, the Region will proceed with minimal
long term loans, only to cover existing swaps.
Although in 2016 the Region had only refinanced € 50 million against € 156 million amorizations, the
Region will only consolidate € 45 million on € 205.5 million amortizations. The objective is to reach a €
400 million floating debt by the end of 2017, that is 13.5% of the outstanding of the Direct debt. In
2018, the Region should only consolidate € 136 million on the € 204 million amortizations. This
strategy will allow to sensibly reduce the cost of the Direct debt. It was 3.97% in 2016. It should drop
to 3.50% in 2017, all that preserving a long duration (8 years) on 31 December 2017.
As for guaranteed debt, the Region will pursue the dynamic management it put in place : counterparty
risk analysis, risk translated into fees, feeding a reserve fund aiming at covering possible future
defaults. Two reviews per year and per institution will insure a strict monitoring of the portfolio.
Meanwhile the portfolio of the guaranteed debt has been reconstituted to 98%, contract per contract,
cash flow per cash flow (interests and amortizations), company per company as well as consolidated.
This database, unique in Belgium, makes it possible to have a clear future vision on the regional risk
linked to granted guarantees. Like the Direct debt portfolio, this database allows to calculate the
Duration, Cost and Structure of the Guaranteed deb, institution per institution as well as consolidated.
In the field of its transversal missions, the Debt agency will pursue the following actions :
maintaining et updating the SFL35 calculator linked to the Sixth State Reform ;
updating of the sensibility to inflation of the consolidated regional budget 2017 that could
entail hedging operations ;
pursuing collaborating with the VGC36 on matters of advice and support in their long term
financing as per the cooperation agreement signed in 2015;
pursuing and developing the collaboration with COCOM37 as per the cooperation agreement
signed in 2016.
As for the FCCB, the integration of 5 institutions is due in 2017 : Brussels Prevention and Security (1st
January 2017), Brussels Planning Bureau (1st January 2017), Bruxelles Démontage, NEO et
beezy.brussels.
35 Special Financing Law. 36 Vlaamse Gemeenschap (Flemish Community).
37 Common Communautary Commission.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 57
PART 4 : GUARANTEED DEBT
The guaranteed debt is made of all conditional liabilities of the Region. This debt isn’t a part of the
public debt but represents a potential debt in case of default and subsequent cash call. The
guarantees are granted by the Region on liabilities (loans, etc.) as well as assets (claims, …).
CHAPTER 1 : MANAGEMENT OF GUARANTEES
The Minister of Finance and Budget has defined implementing and consolidating of a new system for
a dynamic management of guarantees as one of its priorities for the 2014-2019 legislature, with a
reinforcement of their monitoring by the Region38. The Debt Agency (Brussels Finance and Budget)
has been assigned with the implementation thereof.
CHAPTER 2 : PRESENTATION OF THE NEW SYSTEM FOR A DYNAMIC MANAGEMENT
OF GUARANTEES
The Management of guarantees has been assigned to the Direction Front Office of the Debt Agency
(hereafter « Front Office »), created mid-2014. It has developed a dynamic system based on an
analysis procedure of the effective demand of its granting, this demand being made in the frame
defined by the prior authorization in the budget.
A harmonized methodology allows for the Front Office to establish the individual risk profile of the
demanding institution and so, being able to determine the fees – annual yield that the beneficiary will
pay to the Brussels-Capital Region, based on the guaranteed outstanding.
The obligations of the beneficiary are laid in a bilateral convention while the role of the Brussels-
Capital Region is defined guarantee contract. Those two contracts, along with the advice of the Front
Office, are sent to the Government to support the decision of granting or not.
Starting with the authorization granted by the Government, The Front Office will analyze the effective
use of the guarantee – for example, by issuing an opinion on the financing conditions obtained.
Furthermore, the Front Office will monitor the evolution of the risk profile of the beneficiary in the form
of biannual meetings and an update of the financial data necessary for an actualization of its risk
profile and possibly the level of the fees.
The fees will gradually supply a reserve funds and will be used first to make up for an effective default.
Thanks to this dynamic and anticipating management, The Front Office will be able to have a more
profound knowledge of the risks linked to the beneficiaries and to contribute to the prevention of
defaults.
38 Brussels-Capital Region, ordinary session 2014-2015, 7 November 2014, A-51/2 – 2014/2015, annexe à l’Exposé général - part 1 (point OO2.3), p.86.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 58
The Front Office will be also able to more precisely establish the real (financial, different from
accounting) exposure of the Brussels-Capital Region to its guarantees.
This approach, pioneering in Europe, answers likewise to the European Commission’s requirements
in matters of Competition and also to the new methodology of the Standard & Poor’s rating agency on
the off-balance liabilities.
The system has aready been applied, on a bilateral basis, to several entities, such as SBGE,
Hydrobru et the Housing Fund. The process, and methodology, have been approved on 9 July 2015
by the Government in an order. A project for a specific ordinance has been elaborated and will be
shortly submitted to the Government.
CHAPTER 3 : RECONSTRUCTING THE REGIONAL GUARANTEES OUTSTANDING
BASED ON INDIVIDUAL OPERATIONS
Since the end of 2014, the Middle Office of teh Debt Agency (hereafter « Middle Office ») has begun
to gather data from beneficiaries, aiming at an exhaustive documentation regarding guarantees that
have been granted, that means for each financial operation to have at disposal :
credit convention;
guarantee contract, if not already in the credit convention ;
the financial conditions of the draw, in case of a credit line;
the amortization plan, or a schedule of the cash flows that allows to determine the not yet
amortized volume of guarantee, up to its complete amortization.
On 30 September 2015, the Middle Office could reconstitute 63 % of the total of debts guaranteed by
the Region. On 30 September 2016, it was 98 % of guaranteed debts that had been reconstituted,
operation per operation, that is € 2.55 billion. The 2% left are second rank guarantees on portfolios of
small amount operations : mortgage loans granted by social credit companies, guarantees granted by
the Gurantee Fund, eco(logical) loans. For these operations, the Middle Office will still make with
validated statements of the financial managers of these companies.
This reconstruction, operation by operation, allows the Region, for the first time, to have view on the
future evolution of the its guarantees. The graph below presents the evolution of the global
outstanding of the guarantees already granted, for the institutions with documentation at disposal on
March 1st of 2016, up to their complete amortization.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 59
Chart 26 : Evolution of the outstanding of liabilities guaranteed by the Region
0
500.000.000
1.000.000.000
1.500.000.000
2.000.000.000
2.500.000.000
3.000.000.000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047
Institutions / instellingen
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 60
CHAPTER 4 : REGIONAL GUARANTEES AMOUNTS
The two tables below present the whole portfolio of guaranteed debts by the Brussels-Capital Region :
Table 17 : Guarantees authorized and granted in 2016
In thousand €
Institutions
Authorizations
(budget 2016)
Guarantees
granted
(government)
1. Housing Fund
1.1. Bank loans 209,000 120,000
1.2. Loans from SLRB 0 0
2. Social credit companies
2.1. Loans of individuals 3,30039 334
2.2. Bank loans 11,000 0
4. Port of Brussels 0 0
5. S.T.I.B. 0 0
6. Economic expansion 35,000 0
7. B.C.R. Guarantee Fund 0 0
8. F.R.B.R.T.C.
8.1. Mission 1 267,513 0
8.2. Mission 2 400,000 0
8.5. Mission 5 0 0
9. Brussels-Energy 28,000 0
10. B2E (subsidiary of S.R.I.B.) 0 0
11. S.B.G.E. 20,000 0
14. Aquiris 0 0
15. SFAR (SRIB) 37,000 0
17. WIELS 0 0
18. Citydev (SDRB) 13,000 0
19. SLRB
19.1. Bank loans 105,000 0
19.2. Loans from FRCE 10,000 0
20. Hydrobru 250,000 250,000
21. Bruxelles-Recyclage 8,000 0
22. Viangro 0 0
23. Bruxelles-Propreté 45,000 0
24. Eco-prêts 4,200 0
25. SA Centre de tri 25,000 0
30. Bruxelles Biogaz 3,000
34. Brussels-Dismantlement 2,000
TOTAL 1,476,013 370,000
39 No upper limit but the loans must comply with the conditions to grant the guarantee described in « arrêté du 1er février 2001
du Gouvernement de la Région de Bruxelles-Capitale relatif à l'agrément des sociétés de crédit et à l'octroi de la garantie de bonne fin de la Région quant au remboursement des crédits consentis pour la construction, l'achat, la conservation et la transformation d'habitations sociales ou assimilées ».
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 61
Table 18 : Use40, cash calls and outstandings
In thousand €
institutions Uses
2016
Cash calls Outstanding on
31.12.2016
1. Housing Fund
1.1. Bank loans 120,000 0 855,826
1.2. Loans from SLRB 0 0 0
2. Social credit companies
2.1. Loans of individuals 1,782 0 9,052
2.2. Bank loans 0 0 63,537
4. Port of Brussels 0 0 20,186
5. S.T.I.B. 0 0 64,211
6. Economic expansion 0 0 0
7. B.C.R. Guarantee Fund 0 1,362 21,852
8. F.R.B.R.T.C.
8.1. Mission 1 0 0 171,702
8.2. Mission 2 0 0 593,471
8.5. Mission 5 0 0 69,206
9. Brussels-Energy 0 0 15,310
10. B2E (subsidiary of S.R.I.B.) 0 0 2,681
11. S.B.G.E. 0 0 67,239
14. Aquiris 0 0 489,891
15. Plan for the Future of Housing (SRIB) 0 0 40,486
17. WIELS 0 0 1,317
18. Citydev (SDRB) 0 0 0
19. SLRB
19.1. Bank loans 0 0 34,427
19.2. Loans from FRCE 30,000 0 0
20. Hydrobru 0 0 177,700
21. Bruxelles-Recyclage 0 0 4,372
22. Viangro 0 0 1,500
23. Bruxelles-Propreté 0 0 0
24. Eco-prêts 0 0 3,162
25. SA Centre de tri 0 0 0
30. Brussels-Biogas 0 0 0
34. Brussels-Dismantlement 0 0 0
TOTAL 151,782 1,362 2,707,130
40 These uses could be on guarantees granted in 2016 as well as in years before.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 62
The distribution (in percent) is shown in the chart below :
Chart 27 : Distribution of the total guaranteed debt between the benefiting companies for 2016 (in %)
30,38%
20,46%19,56%
9,64%
5,89%
2,63%
11,44%
1.1. Housing Fund of the Brussels CapitalRegion (guaranteed borrowings frombanks)
14. Aquiris
8.2. FRBRTC (mission 2)
8.1. FRBRTC (missions 1 & 5)
20. Hydrobru
5. STIB
Others (<3%)
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 63
PART 5 : APPENDICES
CHAPTER 1 : STANDARD & POOR’S PRESS RELEASE
Press release
PARIS, February 24, 2017. Belgian Region of Brussels-Capital 'AA' Rating Affirmed; Outlook Remains
Stable.
Overview
- In our opinion, the Belgian Region of Brussels-Capital has very strong financial management and
exceptional liquidity.
- We are affirming our 'AA' long-term rating on Brussels-Capital.
- The stable outlook reflects our expectation that Brussels-Capital will continue to post strong
budgetary performance in 2017-2019.
Rating Action
On Feb. 24, 2017, S&P Global Ratings affirmed its 'AA' long-term issuer credit rating on Belgium's
Region of Brussels-Capital. The outlook remains stable.
Rationale
The rating on Brussels-Capital reflects our view of the very predictable and wellbalanced institutional
framework for Belgian communities and regions, and Brussels-Capital's very strong financial
management, exceptional liquidity, strong budgetary performance, and strong economy. We also
factor into our ratings our view of the region's average budgetary flexibility, moderate debt burden, and
moderate contingent liabilities. The long-term rating on Brussels-Capital is at the same level as our 'aa'
assessment of its stand-alone credit profile.
Brussels-Capital has an attractive and diversified economy, which translates into very high GDP per
capita that we estimate at about € 65,545 in 2015. Nevertheless, Brussels-Capital suffers from a
structurally high unemployment rate, well exceeding 15%.
We consider that Brussels-Capital operates within Belgium's very predictable and well-balanced
institutional framework for communities and regions, characterized by the maturity and stability of the
system, and a generally good revenue and expenditure balance. In our opinion, Belgium's sixth state
reform--including the devolving of new responsibilities to regions and communities and greater
financial autonomy to regions--demonstrates the system's predictability. Institutional discussions on
the reform started in 2007, but the budgetary effects were felt only from 2015. We think that the reform
also illustrates the ability of Belgian local and regional governments (LRGs) to influence the central
government's policy.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 64
The Region of Brussels-Capital has shown its ability to handle the sixth-reform new responsibilities
while keeping spending under control thanks to its very strong financial management. We view
positively the region's political and managerial strength, reliable budgeting, prudent and sophisticated
debt management, very efficient and optimized liquidity management, and tight monitoring of
government-related entities (GREs) and other contingent risks, including its well-defined and active
guarantee management system. Beginning in 2016, the region put in place a new budget monitoring
committee to further strengthen its revenue and expenditure management, including closer oversight
of infra-annual budget execution.
We think that Brussels-Capital has the means to maintain its tight rein on operating expenditures, with
annual growth of about 2% (excluding the transfer of new responsibilities) in 2017-2019. Under our
base-case scenario for 2017-2019, we consequently anticipate a good consolidated operating surplus
of 10% of consolidated operating revenues in 2019, compared with 11% in 2016 (based on Brussels-
Capital actuals adjusted by S&P Global Ratings), which is in line with our former base-case figure. At
the same time, we foresee it keeping capital expenditures (capex) at about € 1.5 billion annually in
2017-2019, which is higher than our previous base case due to exceptional investments in transport
and security. Therefore, we anticipate higher deficits after capital accounts than in our previous case,
but they will remain moderate, at about 4% of total revenues on average in 2017-2019, following
limited deficits at 1.8% of total revenues on average in 2015 and 2016.
To maintain a good budgetary performance, we think that Brussels-Capital could use its average
budgetary flexibility, if needed. Its modifiable tax revenues, comprising the supplementary tax on
personal income tax and regional taxes, account for around 50% of its consolidated operating
revenues. Still, we believe that Brussels-Capital would be less willing to tap its tax leeway and more
likely to use its spending flexibility if needed, especially regarding capex, which we expect will account
for 27% of total consolidated expenditures in 2017-2019.
Thanks to its strong budgetary performance, Brussels-Capital's consolidated taxsupported debt will
likely only slightly increase to a moderate 96% of consolidated operating revenues in 2019, compared
with 91% in 2016. Brussels-Capital's taxsupported debt includes the debt of the municipality fund,
Fonds régional bruxellois de refinancement des trésoreries communales (FRBRTC), which is fully
consolidated under the European system of national and regional accounts 2010 (ESA 2010).
FRBRTC lends the majority of its debt proceeds onto self-supporting municipalities in the region. This
on-lent debt currently accounts for about 14% of Brussels-Capital's consolidated operating revenues.
We consider Brussels-Capital's contingent liabilities as moderate and mainly relating to the region's
exposure to social housing mortgage companies, such as the Fonds du Logement de la Région de
Bruxelles-Capitale, and a relatively financially weak municipal sector. In contrast with ESA 2010
treatment of social housing mortgage companies, we do not include their debt in the region's
consolidated taxsupported debt, because we view them as self-supporting. The region's financial
guarantees, mainly for social housing mortgage companies, accounted for about 27% of its
consolidated operating revenues at year-end 2016. In assessing the region's contingent liabilities, we
also factor in the financial situation of the municipal sector, which we view as having some
weaknesses. We will also continue to monitor the potential risks that could emerge from the significant
financial change faced by the public body, Commission Communautaire Commune, which saw its
budget increase to € 1.2 billion from 2015 under the sixth state reform, from € 100 million in 2014.
Lastly, although we incorporate in our contingent liabilities assessment the commercial guarantee
related to a water concession contract between Aquiris and a GRE, Société Bruxellois de Gestion de
l'Eau, we believe it currently bears limited associated risks.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 65
Liquidity
We view Brussels-Capital's liquidity as exceptional. We consider that the region has a strong debt
coverage ratio and strong access to external liquidity.
Brussels-Capital benefits from a direct multiyear € 1.5 billion account facility and FRBRTC also holds €
175 million liquidity lines. We expect the amounts available under this account facility and the region's
cash holdings will cover far more than 120% of its consolidated debt service (including FRBRTC's
short- and long-term debt repayments) in the next 12 months. We also think that the region has strong
access to external funding via the financial markets, especially through its medium-term note program,
its Belgian commercial paper program, and its access to investors in "Schuldschein" loans.
Outlook
The stable outlook reflects our base-case expectation that Brussels-Capital will maintain strong
operating performance and post moderate deficits after capital accounts until 2019.
We might consider a negative rating action in the next 24 months if we observe a structural
deterioration in Brussels-Capital's budgetary performance. This could, for example, be due to the
region's looser monitoring of GREs that are within its consolidation scope or its unwillingness to use its
own expenditure flexibility. Under this downside scenario, we could revise downward our assessment
of Brussels-Capital's financial management.
If we lowered our ratings on Belgium (unsolicited AA/Stable/A-1+), or revised the outlook on Belgium
to negative, we would take a similar action on Brussels-Capital. This is in accordance with our
methodology for rating LRGs and their related sovereigns, under which we cap the long-term ratings
and outlooks on Belgian LRGs at the level of those on the sovereign (see "Methodology:Rating Non-
U.S. Local And Regional Governments Higher Than The Sovereign,"published Dec. 15, 2014, on
RatingsDirect). In our view, Belgium's institutional and financial framework does not enable us to rate
any Belgian LRGs above the sovereign.
Conversely, we could consider a positive rating action if we took a similar action on Belgium and if, in
line with our upside scenario, Brussels-Capital posted very strong operating surpluses, enabling it to
post surpluses after capital accounts in 2017-2019 and structurally maintain a consolidated ratio of
direct debt to the operating balance at approximately 3x.
Both our upside and downside scenarios are unlikely at this stage, however.
Key Sovereign Statistics
- Belgium 'AA/A-1+' Ratings Affirmed; Outlook Stable - January 13, 2017
Related Criteria And Research
Related Criteria
- Criteria - Governments - International Public Finance: Methodology: Rating Non-U.S. Local And
Regional Governments Higher Than The Sovereign - December 15, 2014
- Criteria - Governments - International Public Finance: Methodology For Rating Non-U.S. Local And
Regional Governments - June 30, 2014
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 66
- General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology
And Assumptions - November 19, 2013
- Criteria - Governments - International Public Finance: Methodology And Assumptions For Analyzing
The Liquidity Of Non-U.S. Local And Regional Governments And Related Entities And For Rating
Their Commercial Paper Programs - October 15, 2009
- General Criteria: Use Of CreditWatch And Outlooks - September 14, 2009
- Criteria - Governments - International Public Finance: Methodology And Assumptions: The Impact Of
PPP Projects On International Local And Regional Governments: Refined Accounting Treatment -
December 15, 2008
Related Research
- Institutional Framework Assessments For Non-U.S. Local And Regional Governments - April 21,
2016
- 2015 Annual International Public Finance Default Study And Rating Transitions - June 30, 2016
- Belgium 'AA/A-1+' Ratings Affirmed; Outlook Stable - January 13, 2017
Primary Credit Analyst : Christophe Dore, Paris (33) 1 44 20 66 65 ([email protected])
Secondary Contact : Mehdi Fadli, Paris (33) 1 44 20 67 06 ([email protected])
Additional Contact : [email protected]
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 67
CHAPTER 2 : REGIONAL DEBT OUTSTANDING
2.1. TOTAL DIRECT DEBT (OUTSTANDING)
Table 19 : Total Direct Debt outstanding on 31 December (in thousand €)
1990 1991 1992 1993 1994 1995
1. Direct debt stricto sensu (= cumulative net borrowing)
1.1. Long term loans --- 74,368 310,956 523,357 805,585 921,358
1.2. Short-term loans --- 51,520 60,590 -4,747 27,614 68,078
Subtotal 1 --- 125,888 371,546 518,610 833,199 989,436
2. Debt taken over
2.1. Ex-Prov. of Brabant --- --- --- --- --- ---
2.2. Agglomeration --- --- --- --- --- ---
2.3. Brussels-Cleanliness --- --- --- --- --- ---
2.4. S.I.A.M.U. --- --- --- --- --- ---
Subtotal 2 --- --- --- --- --- ---
Total --- 125,888 371,546 518,610 833,199 989,436
1996 1997 1998 1999 2000 2001
1. Direct debt stricto sensu (= cumulative net borrowing)
1.1. Long term loans 1,039,766 1,000,741 1,069,731 918,330 941,092 918,671
1.2. Short-term loans 78,187 127,104 37,290 161,883 249,306 263,106
Subtotal 1 1,117,953 1,127,845 1,107,021 1,080,213 1,190,397 1,181,776
2. Debt taken over
2.1. Ex-Prov. of Brabant 31,001 30,160 29,233 28,212 27,086 25,843
2.2. Agglomeration 88,428 88,428 88,428 88,428 43,807 43,807
2.3. Brussels-Cleanliness 18,266 18,266 18,266 18,266 18,266 18,266
2.4. S.I.A.M.U. 19,984 19,984 19,984 19,984 19,984 19,984
Subtotal 2 157,679 156,838 155,911 154,890 109,143 107,900
Total 1,275,632 1,284,683 1,262,932 1,235,104 1,299,541 1,289,676
2002 2003 2004 2005 2006 2007
1. Direct debt stricto sensu (= cumulative net borrowing)
1.1. Long term loans 977,770 1,063,505 1,136,208 1,049,446 1,125,288 1,001,341
1.2. Short-term loans 276,366 165,163 351,928 240,958 270,678 358,810
Subtotal 1 1,254,136 1,228,668 1,488,136 1,290,404 1,395,966 1,360,151
2. Debt taken over
2.1. Ex-Prov. of Brabant 24,469 22,961 9,870 8,117 6,251 4,275
2.2. Agglomeration 43,807 43,807 43,807 17,730 0 0
2.3. Brussels-Cleanliness 18,266 0 0 0 0 0
2.4. S.I.A.M.U. 19,984 0 0 0 0 0
Subtotal 2 106,526 66,768 53,677 25,847 6,251 4,275
Total 1,360,661 1,295,436 1,541,813 1,316,251 1,402,217 1,364,426
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 68
2008 2009 2010 2011 2012 2013
1. Direct debt stricto sensu (= cumulative net borrowing)
1.1. Long term loans 1,139,789 1,984,039 2,329,039 2,645,539 3,084,540 2,994,540
1.2. Short-term loans 592,401 202,874 240,731 291,905 61,496 25,988
Subtotal 1 1,732,190 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528
2. Debt taken over
2.1. Ex-Prov. of Brabant 2,190 0 0 0 0 0
2.2. Agglomeration 0 0 0 0 0 0
2.3. Brussels-Cleanliness 0 0 0 0 0 0
2.4. S.I.A.M.U. 0 0 0 0 0 0
Subtotal 2 2,190 0 0 0 0 0
Total 1,734,380 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528
2014 2015 2016
1. Direct debt stricto sensu (= cumulative net borrowing)
1.1. Long term loans 2,870,750 2,668,750 2,568,750
1.2. Short-term loans 79,147 81,626 119,262
Subtotal 1 2,949,897 2,750,376 2,688,012
2. Debt taken over
2.1. Ex-Prov. of Brabant 0 0 0
2.2. Agglomeration 0 0 0
2.3. Brussels-Cleanliness 0 0 0
2.4. S.I.A.M.U. 0 0 0
Subtotal 2 0 0 0
Total 2,949,897 2,750,376 2,688,012
Chart 28 : Total Direct Debt outstanding 1990-2016 on 31 December (in million €)
0
500
1.000
1.500
2.000
2.500
3.000
3.500
Cumulated net borrowing Cumulated taken-over debt
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 69
2.2. INDIRECT DEBT (OUTSTANDING)
Table 20 : Indirect Debt outstanding on 31 December (in thousand €)
1990 1991 1992 1993 1994 1995
1. Agglo 96,321 98,995 66,345 63,735 61,061 61,061
2. S.T.I.B. 348,079 372,631 417,222 410,690 464,547 450,090
3. Loans communal41 670,363 647,480 589,510 556,689 311,810 91,175
4. Loans F.R.B.R.T.C. --- --- --- --- 47,236 109,633
5. subsidized works42 89,300 85,644 82,301 77,944 73,493 71,354
6. S.D.R.B.43 29,873 26,960 33,788 28,554 21,430 16,120
7. Brussels-Cleanliness --- --- 18,766 17,297 16,206 17,780
8. Fire dep. --- --- 14,970 14,367 13,383 15,802
9. Economic expansion --- 2,479 2,479 2,479 2,479 ---
10. Ex-Province Brabant --- --- --- --- --- 33,398
11. C.I.B.E. 284 268 250 232 212 192
12. Housingt 306,951 247,936 209,688 163,316 143,242 70,730
Total 1,541,171 1,482,393 1,435,319 1,335,303 1,155,099 937,335
1996 1997 1998 1999 2000 2001
1. Agglo --- --- --- --- --- ---
2. S.T.I.B. 431,969 391,934 351,948 341,448 243,221 188,597
3. Loans communal 50,667 555 --- --- --- ---
4. Loans F.R.B.R.T.C. 213,488 220,367 179,772 132,568 119,866 114,604
5. subsidized works 34,187 31,688 29,080 26,366 23,267 20,461
6. S.D.R.B. 11,640 7,137 3,203 1,792 1,128 562
7. Brussels-Cleanliness --- --- --- --- --- ---
8. Fire dep. --- --- --- --- --- ---
9. Economic expansion --- --- --- --- --- ---
10. Ex-Province Brabant --- --- --- --- --- ---
11. C.I.B.E. 170 149 127 103 79 54
12. Housingt 57,555 50,247 41,763 46,038 85,255 67,686
Total 799,676 702,077 605,893 548,315 472,816 391,964
41 Starting in 1993, via the Brussels Fund for the Refinancing of the Communal Treasuries (FRBRTC).
42 Includes public works, hygiene and water.
43 Concerns the acquisition of industrial land and the Military Hospital.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 70
Chart 29 : Evolution of the Indirect Debt on 31 December (in thousand €)
2.3. REGIONAL DEBT STRICTO SENSU (OUTSTANDING)
Table 21 : Regional Debt stricto sensu outstanding on 31 December (in thousand €)
1990 1991 1992 1993 1994 1995
1. Total direct debt
Subtotal 1 --- 125,888 371,546 518,610 833,199 989,436
2. Indirect debt
Subtotal 2 1,541,171 1,482,393 1,435,319 1,335,303 1,155,099 937,335
3. Regional debt
Total 1 + 2 1,541,171 1,608,281 1,806,865 1,853,913 1,988,298 1,926,771
Including historical STIB
debt
341,448 341,448 341,448 341,448 341,448 341,448
Total debt without STIB
debt
1,199,723 1,266,833 1,465,417 1,512,465 1,646,850 1,585,323
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1.800.000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 71
1996 1997 1998 1999 2000 2001
1. Total direct debt
Subtotal 1 1,275,632 1,284,683 1,262,932 1,235,104 1,299,541 1,289,676
2. Indirect debt
Subtotal 2 799,676 702,077 605,893 548,315 472,816 391,964
3. Regional debt
Total 1 + 2 2,075,308 1,986,760 1,868,825 1,783,419 1,772,357 1,681,640
Including historical STIB
debt
341,448 341,448 341,448 341,448 243,221 188,597
Total debt without STIB
debt
1,733,860 1,645,312 1,527,377 1,441,971 1,529,136 1,493,043
Chart 30 : Regional Debt stricto sensu outstanding on 31 December (in thousand €)
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
including historical STIB Debt
excluding historical STIB debt
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 72
CHAPTER 3 : DEBT OUTSTANDING UNDER ESA95 STANDARD
Table 22 : Debt outstanding under ESA95 standard (in thousand €)
In thousand € 2002 2003 2004 2005 2006 2007
1. Regional direct debt
1.1. Direct debt stricto sensu 1,254,136 1,228,668 1,488,136 1,290,404 1,395,966 1,360,151
1.2. Direct debt taken-Over 106,526 66,769 53,677 25,848 6,251 4,275
Total direct debt 1,360,662 1,295,437 1,541,813 1,316,252 1,402,217 1,364,426
2. Other consolidated regional debts
2.1. STIB 324,047 290,264 256,823 244,921 211,244 209,524
2.2. Loans FRBRTC 139,458 163,203 185,959 205,877 221,447 239,622
2.3. Subsidized works 17,715 15,497 13,209 10,931 8,792 6,712
2.4. CIBE 27 0 0 0 0 0
2.5. Housing 48,321 0 0 0 0 0
2.6. Guarantee Fund 798 1,708 1,739 453 734 1,092
Total other debts 530,366 470,672 457,730 462,182 442,217 456,950
3. Credit balances of institutions within ESA95 scope
Total - 176,897 - 104,451 - 109,621 - 31,069 - 51,810 - 34,499
Total debt under ESA95
Total 1,714,131 1,661,658 1,889,922 1,747,365 1,792,624 1,786,877
In thousand € 2008 2009 2010 2011 2012 2013
1. Regional direct debt
1.1. Direct debt stricto sensu 1,732,190 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528
1.2. Direct debt taken-Over 2,190 0 0 0 0 0
Total direct debt 1,734,380 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528
2. Other consolidated regional debts
2.1. STIB 177,739 190,244 146,594 125,770 109,373 95,205
2.2. Loans FRBRTC 256,221 251,459 235,572 248,810 231,209 204,206
2.3. Subsidized works 5,059 3,482 2,298 1,314 578 333
2.4. CIBE 0 0 0 0 0 0
2.5. Housing 0 0 0 0 0 0
2.6. Guarantee Fund 138 0 0 0 0 0
Total other debts 439,157 445,185 384,464 375,894 341,160 335,738
3. Credit balances of institutions within ESA95 scope
Total - 106,085 - 94,995 -103,656 -125,259 -145,159 -134,476
Total debt under ESA95
Total 2,067,452 2,537,103 2,850,578 3,188,079 3,342,037 3,219,796
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 73
Chart 31 : Evolution of the Regional Debt consolidated under the ESA95 norm (in thousand €)
Chart 32 : Evolution of the (Total Debt/Total receipts) ratio on 31 December under ESA95 norm
0
500.000
1.000.000
1.500.000
2.000.000
2.500.000
3.000.000
3.500.000
4.000.000
4.500.000
5.000.000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
82,41% 82,59%
72,56%
66,25% 66,63%
73,51%
99,48%103,86%
110,31% 108,91%
94,05%
126,83%
100,97%
0%
20%
40%
60%
80%
100%
120%
140%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 74
CHAPTER 4 : DEBT OUTSTANDING UNDER ESA2010 STANDARD
The change of methodology is effective September 2014.
Table 23 : Debt outstanding under ESA2010 standard (in thousand €)
In thousand € 2012 2013 2014 2015 2016
1. Regional Direct debt 3,146,036 3,020,528 2,949,897 2,750,376 2,688,012
2. Other consolidated regional
debts 1,755,761 1,883,579 1,926,506 2,072,277 2,207,249
3. « Maastricht » gross
consolidated debt – ESA2010 4,901,797 4,904,107 4,876,403 4,822,653 4,895,261
4. Creditor balance of institutions
within the consolidation
perimeter
-389,201 -370,066 -235,172 -289,808 -361,742
Total net ESA debts(3+4) 4,512,596 4,534,041 4,641,231 4,532,844 4,533,519
Chart 33 : Evolution of the Regional Debt consolidated under the ESA2010 norm (in thousand €)
-1.000.000
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
6.000.000
2012 2013 2014 2015 2016
3. « Maastricht » gross consolidated debt – ESA2010
4. Creditor balance ofinstitutions within theconsolidation perimeter
Total net ESA debts(3+4)
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 75
Chart 34 : Evolution of the (total debt/total receipts) ratio on 31 December
CHAPTER 5 : PORTFOLIO COST OF FUNDING HISTORY
Table 24 : Portfolio cost of funding history
Year Average annual rate Average monthly rate
Minimum Maximum
1997 5.18 % 5.06 % 5.26 %
1998 5.13 % 5.00 % 5.23 %
1999 4.70 % 4.49 % 4.93 %
2000 5.31 % 5.00 % 5.61 %
2001 5.45 % 5.30 % 5.53 %
2002 5.03 % 4.88 % 5.29 %
2003 4.57 % 4.35 % 4.76 %
2004 4.11 % 3.90 % 4.32 %
2005 3.79 % 3.60 % 3.96 %
2006 3.86 % 3.73 % 4.02 %
2007 4.13 % -1.49 % 9.63 %
2008 3.52 % -3.49 % 4.27 %
2009 3.32 % 3.11 % 3.63 %
2010 3.56 % 1.98 % 4.01 %
2011 3.44 % 1.25 % 3.91 %
2012 3.74 % 3.62 % 4.03 %
2013 3.90 % 3.82 % 3.99 %
2014 3.93 % 3.74 % 4.03 %
2015 4.02 % 3.79 % 4.27 %
2016 3.98 % 3.83 % 4.15 %
147,06%130,72%
127,54%
105,00%98,11%
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
120,00%
140,00%
160,00%
2012 2013 2014 2015 2016
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 76
Chart 35 : Average monthly financing cost (weighted by average outstanding) of the Total Direct Debt (1997-2016)
CHAPTER 6 : PORTFOLIO DURATION HISTORY
Table 25 : Portfolio duration history
Year Duration on 31 December Annual average duration Duration at end of month
Minimum Maximum
1998 4.14 3.80 3.26 4.14
1999 3.40 3.57 3.35 3.94
2000 3.29 3.31 2.84 3.56
2001 3.14 3.34 3.09 3.62
2002 3.32 3.08 2.67 3.60
2003 3.66 3.50 2.93 3.91
2004 3.61 3.41 2.84 4.18
2005 3.57 3.69 3.50 4.04
2006 5.12 5.18 4.85 5.38
2007 3.17 3.51 3.15 4.46
2008 3.05 3.23 2.87 3.58
2009 6.05 4.48 2.87 6.05
2010 7.78 8.02 6.12 9.84
2011 8.18 7.92 7.24 8.93
2012 8.96 8.19 7.48 9.02
2013 8.86 9.06 8.86 9.31
2014 9.99 9.51 8.93 10.20
2015 9.88 10.51 9.88 10.84
2016 9.65 10.19 9.65 10.48
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
10,0019
97-0
119
97-0
719
98-0
119
98-0
719
99-0
119
99-0
720
00-0
120
00-0
720
01-0
120
01
-07
2002
-01
2002
-07
2003
-01
2003
-07
200
4-0
120
04-0
720
05-0
120
05-0
720
06-0
120
06
-07
2007
-01
2007
-07
2008
-01
2008
-07
200
9-0
120
09-0
720
10-0
120
10-0
720
11-0
120
11
-07
2012
-01
2012
-07
2013
-01
2013
-07
2014
-01
2014
-07
2015
-01
2015
-07
2016
-01
2016
-07
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 77
CHAPTER 7 : PORTFOLIO STRUCTURE HISTORY
Through the use of hedging designed to protect the portfolio against a rate increase, from 1.31 to
38.74% only of the composition of the debt remained at variable rates in the strictest sense (ie
unprotected) between 1997 and 2016 (2.13% in 2016). The fixed portion of the portfolio was over the
same period from 53.57 to 95.33% (92.35% in 2016), the protected part, from 0.00 to 12.80% (0.00%
in 2016), and the offset part (FCCB), from 1.41 to 8.27% (5.52% in 2016).
Chart 36 : Portfolio structure history (on 31 December)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1997
199
819
9920
0020
0120
0220
0320
0420
0520
0620
0720
08
2009
2010
2011
2012
2013
2014
201
520
16
Variable & Floating - FCCB
FCCB
Hedged / Capped
Fixed
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 78
CHAPTER 8 : PORTFOLIO AMORTIZATION SCHEDULE
The graphs thereafter show the entire amortization plan of the consolidated debt portfolio as well as its
accumulated amortizations.
Chart 37 : Amortization schedule of the consolidated debt (2017-2044)
Chart 38 : Cumulated amortizations of the consolidated debt (2017-2044)
0
50.000.000
100.000.000
150.000.000
200.000.000
250.000.000
2017
2018
2019
2020
202
1
2022
2023
2024
2025
202
6
2027
2028
2029
2030
203
2
2033
2034
2035
2036
2038
2042
2044
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
201
7
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
204
3
2044
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 79
CHAPTER 9 : GUARANTEED DEBT OUTSTANDING AND DEFAULT RATIOS
Table 26 : Guaranteed debt outstanding on December 31 (in thousand €)
2011 2012 2013 2014 2015
1. Housing Fund
1.1. Bank loans 629,453 753,750 811,831 760,331 790,581
1.2. Loans from SLRB 0 0 0 0 0
1.3. Loans from FRCE 0 0 0 0 0
2. Social credit companies
2.1. Loans of individuals 24,730 23,250 21,364 22,161 19,894
2.2. Bank loans 78,530 74,705 73,375 72,256 66,638
3. Middle Housing 23 11 9 0 0
4. Port of Brussels 22,203 22,138 21,559 21,238 20,889
5. S.T.I.B. 97,374 89,933 82,245 74,259 68,479
6. Economic expansion 0 0 0 0 0
7. B.C.R. Guarantee Fund 41,556 37,234 38,243 36,434 29,080
8. F.R.B.R.T.C.
8.1. Mission 1 222,710 205,898 187,374 178,623 179,143
8.2. Mission 2 180,420 261,810 332,369 418,736 509,098
8.5. Mission 5 26,100 25,311 52,826 74,362 71,849
9. Brussels-Energy 43,781 38,577 33,135 27,450 21,511
10. B2E (subsidiary of S.R.I.B.) 6,602 5,869 5,111 4,327 3,518
11. S.B.G.E. 69,154 66,133 62,965 59,652 56,188
12 Bruxelles-Midi 4,171 0 0 0 0
13 Holding communal 0 0 0 0 0
14. Aquiris 688,400 655,700 614,700 573,341 532,399
15. SFAR (SRIB) 9,244 19,469 31,292 29,905 33,826
16. SA Flagey 210 260 233 233 0
17. WIELS 1,500 1,463 1,425 1,385 1,344
18. Citydev (SDRB) 0 0 0 0 0
19. SLRB
19.1. Bank loans 35,941 37,772 36,835 36,071 35,268
19.2. Loans from FRCE 0 0
20. Hydrobru 30,000 74,000 164,500 158,900 153,300
21. Bruxelles-Recyclage --- 7,000 6,363 5,713 5,049
22. Viangro 1,500 1,500 1,500
23. Bruxelles-Propreté 0
24. Eco-prêts 2,967
25. SA Centre de tri 0
TOTAL 2,212,103 2,400,283 2,579,254 2,556,842 2,602,521
Default ratios 2006-2016 of the total guaranteed debt (region intervention/guaranteed outstanding)
2006 0.0872% 2012 0.0000%
2007 0.0991% 2013 0.0014%
2008 0.0068% 2014 0.0000%
2009 0.0000% 2015 0.0190%
2010 0.0000% 2016 0.0503%
2011 3.0514%
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 80
CHAPTER 10 : CONSOLIDATED DEBT LOANS
Table 27 : Consolidated debt loans
Loans in EUR
Reference Amount Type Margin (BP) Disponibility date Maturity
2011_12_07_LOAN09 15,000,000.00 IRS 5 Y 07.12.2011 04.04.2016
2011_06_01_MTN_01 25,000,000.00 Euribor 6M 80.00 01.06.2011 01.06.2016
2009*2-10 5,000,000.00 IRS 7Y 110.00 13.07.2009 13.07.2016
2009*2-11 5,000,000.00 IRS 7Y 110.00 13.07.2009 13.07.2016
2009*2-12 10,000,000.00 IRS 7Y 110.00 13.07.2009 13.07.2016
2014_07_29_LOAN01 60,000,000.00 Euribor 6M 36.00 29.07.2014 29.07.2016
2011_10_14_LOAN02 30,000,000.00 Euribor 6M 139.00 14.10.2011 14.10.2016
2011_10_14_LOAN03 6,000,000.00 Euribor 6M 139.00 14.10.2011 14.10.2016
2011*2-1 25,000,000.00 IRS 6Y 52.00 10.02.2011 10.02.2017
2011*4-2 25,000,000.00 Euribor 6M 80.00 21.03.2011 21.03.2017
2011*4-1 MTN 25,000,000.00 Euribor 6M 80.00 10.03.2011 18.04.2017
2011_06_08_MTN_01 15,000,000.00 IRS 6Y 88.00 08.06.2011 08.06.2017
2011_06_17_MTN_01 69,000,000.00 Euribor 3M 105.00 17.06.2011 17.06.2017
2011_07_06_SCHU01 25,000,000.00 IRS 6Y 87.00 06.07.2011 06.07.2017
2009*2-14 20,000,000.00 Euribor 6M 52.00 17.12.2009 17.12.2017
2009*2-15 1,500,000.00 IRS 8Y 52.00 17.12.2009 17.12.2017
2010*3-1 50,000,000.00 IRS 8Y 47.00 15.01.2010 15.01.2018
2010*3-2 38,000,000.00 IRS 8Y 46.00 15.01.2010 15.01.2018
2009*2-5 36,000,000.00 IRS 9Y 120.00 30.04.2009 30.04.2018
2012_06_26_MTN_01 5,000,000.00 IRS 6Y 128.00 26.06.2012 26.06.2018
2011_07_06_SCHU02 75,000,000.00 IRS 7Y 85.50 06.07.2011 06.07.2018
2009*2-4 92,750,000.00 IRS 10Y 120.00 31.03.2009 31.03.2019
2011*1-1 MTN 50,000,000.00 Euribor 6M 66.00 11.02.2011 18.04.2019
2011*1-2 MTN 25,000,000.00 Euribor 6M 66.00 11.02.2011 18.04.2019
2011*3-1 MTN 25,000,000.00 Euribor 6M 88.00 08.03.2011 18.04.2019
2010*3-3 12,000,000.00 IRS 10Y 52.00 15.01.2010 15.01.2020
2011_04_28_MTN_01 25,000,000.00 Euribor 6M 56.00 28.04.2011 28.04.2020
2010*1-1 50,000,000.00 Euribor 6M 36.00 23.06.2010 23.06.2020
2010*1-2 MTN 50,000,000.00 Euribor 3M 55.00 23.06.2010 23.06.2020
2010*1-3 50,000,000.00 Euribor 6M 36.00 23.06.2010 23.06.2020
2012_02_02_LOAN02 19,000,000.00 IRS 8Y 02.02.2012 15.12.2020
2011*3-2 MTN 25,000,000.00 IRS 10Y 95.00 08.03.2011 08.03.2021
2011_12_07_LOAN08 7,500,000.00 IRS 15 Y 07.12.2011 19.03.2021
2009*3-1 10,000,000.00 IRS 13Y 120.00 01.04.2009 01.04.2021
2009*3-2 20,000,000.00 IRS 13Y 120.00 01.04.2009 01.04.2021
2009*3-4 20,000,000.00 IRS 13Y 120.00 14.04.2009 14.04.2021
2012_07_20_LOAN01 25,000,000.00 Euribor 6M 190.00 20.07.2012 20.07.2021
2011_07_22_MTN_01 20,000,000.00 Euribor 6M 100.00 22.07.2011 22.07.2021
2006*1-3 25,000,000.00 Euribor 6M - 3.00 20.02.2006 20.10.2021
2012_06_26_LOAN01 50,000,000.00 IRS 10Y 180.00 26.06.2012 26.06.2022
2012_07_20_LOAN02 25,000,000.00 Euribor 6M 195.00 20.07.2012 20.07.2022
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 81
Loans in EUR
Reference Amount Type Margin (BP) Disponibility date Maturity
2009*7-1/14 150,000,000.00 IRS 13Y 75.00 21.09.2009 21.09.2022
2012_08_06_MTN_01 50,000,000.00 Euribor 3M 175.00 06.08.2012 06.01.2023
2013_03_28_MTN_02 5,000,000.00 IRS 10Y 85.00 28.03.2013 28.03.2023
2014_10_08_MTN_01 10,000,000.00 Euribor 6M 19.00 08.10.2014 08.04.2023
2009*1-4 65,000,000.00 Euribor 6M 60.00 29.07.2014 29.07.2023
2012_04_10_LOAN01 25,000,000.00 Euribor 6M 59.00 10.04.2012 26.06.2024
2014_07_06_LOAN01 31,500,000.00 Euribor 3M 60.00 07.07.2014 07.07.2024
2012_08_01_MTN_01 25,000,000.00 IRS 12Y 148.00 01.08.2012 20.12.2024
2015_02_26_SCHU01 15,000,000.00 Euribor 6M 1.80 26.02.2015 28.03.2025
2009*6-1 20,000,000.00 IRS 16Y 80.00 04.09.2009 04.09.2025
2016_09_16_MTN_01 30.000.000,00 Euribor 6M 0,50 16.09.2016 14.10.2025
2006*1-1 75,000,000.00 Euribor 6M 0.00 10.05.2006 11.05.2026
2016_06_22_MTN_01 20.000.000,00 Euribor 6M 0,00 22.06.2016 29.07.2026
2012_02_15_SCHU01 5,000,000.00 IRS 15Y 151.00 15.02.2012 15.02.2027
2011_10_14_LOAN01 75,000,000.00 Euribor 6M 59.00 14.10.2011 14.10.2027
2010*5-1 100,000,000.00 IRS 18Y 54.00 06.04.2010 06.04.2028
2013_04_08_MTN_01 30,000,000.00 IRS 15Y 85.00 08.04.2013 08.04.2028
2014_04_07_MTN_01 15,000,000.00 IRS 15Y 57.00 07.04.2014 07.04.2029
2012_12_03_SCHU01 35,500,000.00 IRS 17Y 113.00 03.12.2012 03.12.2029
2009*8-2 20,000,000.00 Euribor 6M 52.00 17.12.2009 17.12.2029
2009*8-1 132,000,000.00 IRS 20Y 70.00 21.12.2009 21.12.2029
2012_02_06_SCHU01 10,000,000.00 IRS 18Y 178.00 06.02.2012 06.02.2030
2010*6-1 75,000,000.00 IRS 20Y 55.00 07.05.2010 07.05.2030
2012_02_27_MTN01 15,000,000.00 IRS 20Y 159.00 27.02.2012 27.02.2032
2012_08_09_SCHU01 15,000,000.00 IRS 20Y 160.00 09.08.2012 09.08.2032
2012_08_09_SCHU02 1,500,000.00 IRS 20Y 160.00 09.08.2012 09.08.2032
2012_11_01_SCHU01 40,000,000.00 IRS 20Y 119.00 01.11.2012 01.11.2032
2012_11_02_SCHU01 50,000,000.00 IRS 20Y 107.00 02.11.2012 02.11.2032
2012_11_14_MTN01 10,000,000.00 IRS 20Y 116.00 14.11.2012 14.11.2032
2012_12_06_MTN01 50,000,000.00 IRS 20Y 116.00 06.12.2012 06.12.2032
2013_03_28_MTN_01 5,000,000.00 IRS 20Y 103.00 28.03.2013 28.03.2033
2014_04_07_MTN_03 5,000,000.00 IRS 20Y 69.00 07.04.2014 07.04.2034
2014_04_08_SCHU01 10,000,000.00 IRS 20Y 71.00 08.04.2014 08.04.2034
2013_06_26_SCHU01 25,000,000.00 IRS 25Y 85.00 26.06.2013 26.06.2034
2012_09_07_SCHU01 30,000,000.00 IRS 22Y 133.00 07.09.2012 07.09.2034
2011_09_08_SCHU01 30,000,000.00 IRS 23Y 119.00 08.09.2011 08.09.2034
2010*4-1 25,000,000.00 Euribor 6M 45.00 06.04.2010 06.04.2035
2012_12_10_SCHU01 10,000,000.00 IRS 23Y 118.00 10.12.2012 10.12.2035
2013_04_08_SCHU01 10,000,000.00 IRS 23Y 93.00 08.04.2013 08.04.2036
2006*1-2 75,000,000.00 Euribor 6M 0.90 10.05.2006 12.05.2036
2013_03_28_SCHU01 25,000,000.00 IRS 25Y 95.00 28.03.2013 28.03.2038
2012_11_23_SCHU01 35,000,000.00 IRS 30Y 133.00 23.11.2012 24.11.2042
2014_04_07_MTN_02 20,000,000.00 IRS 30Y 91.00 07.04.2014 07.04.2044
2014_04_07_SCHU01 21,500,000.00 IRS 30Y 84.00 07.04.2014 07.04.2044
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 82
PART 6 : GLOSSARY
1. REGIONAL CONCEPTS
Centralization of treasuries FCCB was born of a political will to centralize treasury of 12 organizations (see FCCB) in
a notional system. Centralization of cash is a technique that permits the optimization of
cash management of various accounts without having to make transfers of funds from
one account to another. Region receives / pays interest on the cumulated balance of all
accounts located in the centralization perimeter. In exchange for this centralization,
participating institutions receive a grant for sound financial management which
consists of a main amount obtained by applying a Euribor rate (minus 8 BP) on their
average total outstanding, capped to the total historical cash brought44; and an
additional amount (between 0 and 25 BP on the entire position of the institution, both
on own and transit accounts), depending on the quality of the cash flow forecasts they
provide for the Region. Ultimately, institutions will come out with an annual "return"
that the market can’t offer, unless with a greater risk.
Debt management
directorate
Debt management directorate is responsible for optimizing the management of the
regional direct debt. For this purpose, it ensures the financing needs in the short,
medium and long term for the Region. It uses all the financial products (or derivatives)
on the interest rates yield curve to minimize portfolio risk, that is to say liquidity risk
and risk of rate, as well as its cost. By its funding on the Belgian and European markets,
the Debt Agency is brought to establish and maintain close relationships with domestic
and international banking. It informs the Cabinet of Finance, the Government and the
Brussels Regional Council and the supervisory bodies such as the Inspectorate of
Finance, the Court of Auditors, the rating agency Standard & Poors of its management
and their results. It also controls the evolution of indirect debt and debt guaranteed by
the Region.
Debt taken over If the concepts of net borrowing and direct debt stricto sensu merged until 1995, it is
no longer the same since the beginning of 1996. Indeed, part of the indirect debt
(called debt taken over), that is debts of SIAMU, of Brussels-Cleanliness, of the former
province of Brabant and the former Brussels agglomeration were renegotiated and
included in the total direct debt. Starting in 2009, the concepts of net borrowing and
direct debt stricto sensu merge again. Indeed, debt taken over ceased to exist at that
date. As it is repaid, the new loans will be exclusively financed under the concept of net
borrowing.
ESA2010 The European System of National and Regional Accounts (ESA2010) defines a common
accounting framework for member countries of the European Union. It replaces the
ESA95 norm on September 1st 2014.
ESA2010 debt The ESA2010 norm consolidates all the debts in the balance (excepted commercial
debts, among others) of regional institutions belonging to the public administrations
sector (s.1312) with the government’s services (the Brussels’ Regional Public Service).
This consolidation is purely an accounting one, its result being called “Consolidated
44 The Euribor rate maturity will depend on the quality of smoothing of the cash flows of the institutions.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 83
Gross Debt” or “Maastricht Debt”.
Financial Coordination
Centre (FCCB)
The Financial Coordination Centre for the Brussels-Capital Region was established by
ordinance of 19 February 2004 (The Government Order containing the terms of
function of the Centre and establishing a financial cash pooling for institutions of public
interest was taken on 10 June 2004). It has been operational since October 1, 2004
with 7 institutions : ABE, the ARP, the CIRB, the IBGE IRSIB the SIAMU and SLRB. CES,
ORBEM and SDRB came on 1 January 2005. The Port of Brussels STIB, on April 1, 2005.
The Ordinance of 23 February 2006 concerning the provisions applicable to the budget,
accounting and control expands the scope of FCCB to all autonomous administrative
institutions in Brussels included under sector code 13.12. Under this ordinance, Brugel -
the Brussels Energy Regulator- and the NPO IRISteam were integrated on 1 January and
1 July 2012, respectively; and the Parking Agency on 1 July 2013.
Article 101 of the budgetary ordinance of 2013 made provisions so that article 68 of
the OOBAC could be used with the Regional Housing Fund. Based on that the Housing
Fund was integrated in the FCCB system on 1 October 2013. The Regional Trade Agency
(Atrium) joined the FCCB on April 1st, 2015. In 2016, visit.brussels has also been
integrated. Lastly, on January 1st of 2017, two new institutions have been added to the
list of companies participating to the FCCB : Brussels Prevention and Security and the
Brussels planning bureau (perspective.brussels).
Guaranteed debt The guaranteed debt is made of all conditional liabilities of the Region. This debt isn’t a
part of the public debt but represents a potential debt in case of default and
subsequent cash call. The guarantees are granted by the Region on liabilities (loans,
etc.) as well as assets (claims, …).
Indirect debt Loans that the Region pays on behalf of other organizations. The repayment of these
loans is set in the budget in terms of “budget re-entry”
Total direct debt It includes the cumulated net borrowings (direct debt stricto sensu) since the creation
of the Region as well as the debt taken over. The loan repayment is defined in the
budget in terms of "depreciation of capital."
Total direct debt
(outstanding)
The total direct debt outstanding consists of the direct debt stricto sensu (floating debt,
for the short-term and consolidated direct debt stricto sensu, for the long term) and
debt taken over. The floating debt includes the fixed-term advances (ATF), treasury
bills (BT) and cash credits. The floating debt (short-term) and the consolidated direct
debt strict sense (long term) form the cumulative net borrowing. The consolidated
direct debt stricto sensu (LT) and debt taken over (LT) are the consolidated direct debt
(LT).
2. ANALYTICAL INSTRUMENTS
Amortization schedule The amortization schedule shows when all loans will be repaid (dates and amounts).
Average monthly and annual
outstanding
The outstanding is weighted by the number of days either of the month or of the year.
The main reason for the increase or decrease in the average outstanding is the
management of cash and budget flows. The increase in the average amount is due to a
negative difference between cash receipts and expenditures, the decrease, to a
positive difference.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 84
Cost of funding The daily basis of calculation of the cost of funding is "full costing" (Consolidated debt+
floating debt + receipts and expenses of Derivatives+ FCCB effect).
Counterparty risk The counterparty risk arises from the uncertainty for a counterparty to fulfill its
financial obligations towards the Region.
Duration The duration is defined as the ratio of the weighted present value of each cash flow to
the present value of all cash flows. It assesses the average risk of the portfolio on the
basis of all discounted cash flows (interest and amortizations).
Euribor (European Interbank
Offered Rate)
The Euribor is the interbank rate applied in Europe. This is the rate at which a first-rank
bank is willing to lend funds in EUR to another first-rank bank. Rates are calculated
daily and cover maturities of less than 1 year. The Euribor replaced on 1 January 1999
the national interbank interest rates of the countries that are part of the eurozone.
Liquidity risk Liquidity risk is the risk of not finding a funding at short, medium or long term in order
to cover an existing or future deficit.
This risk translates automatically in higher margins on bank reference rate (Euribor,
IRS, OLO) required by credit institutions on consolidation loans and thus a higher cost
of financing for the borrower.
The smoothing quality of the direct debt amortization schedule reduces refinancing
concentrations and therefore the liquidity risk.
Mark to market risk Mark-to-market risk is the direct debt (and linked swaps) exposure to interest rates
risk. It is equal to the change in value (in euro) of the regional financial liabilities, in
function of a 1BP (0.01%) change in interest rate (zero-coupon) of the corresponding
maturities. A positive result points to an increase in value of the Region’s liabilities
whenever the reference rate decreases by 1BP.
Portfolio structure Portfolio Structure The structure of the portfolio consists of two parts:
- Which is not protected or subject to interest rate risk (consolidated debt at fixed rate
or at protected variable rate, floating debt whose risk is offset by the asset position of
FCCB);
- Which is subject to interest rate risk (variable rate consolidated debt and floating debt
of which the risk is not offset by the asset position of FCCB)..
Rate risk Interest rate risk is the risk associated with fluctuations in the interest curve. It defines
the level of exposure of the portfolio's total direct debt to a rate increase. Various
financial instruments are available to protect the portfolio : interest rate swaps (IRS,
forward swap, ...) FRA (forward rate agreement), interest rate options (cap, floor,
collar, ...), etc.
Refinancing risk Refinancing risk is the risk that the region would be unable to repay loans contracted in
previous years, as well as the interest expense associated with them, because it can’t
borrow the amount to be refunded.
Standard deviation /average This analysis tool gives the value of the dispersion around the mean of future
amortizations. It demonstrates the quality of smoothing of the amortization plan, and
thus the risk of liquidity.
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 85
3. FINANCIAL PRODUCTS
Cap A cap is an OTC contract between two counterparties that allows the purchaser, on
payment of a premium (as a percentage of nominal), to hedge a variable rate loan
against a rise in interest rates above a ceiling rate. This is a set of options on successive
maturities of interest rates (roll-over system).
At each fixing, the rate level is compared to the exercise price of the cap. If the rate is
higher than the exercise price, the buyer receives from the seller of cap the interest
rate differential times the nominal amount prorate temporis of the number of days in
the period. If the rate is below the strike price, the option will not be exercised.
Cap with knock-out Cap with Knock Out is a cap to which has been added a ceiling rate (= knock) with a
view to reduce the premium to pay. If the rate exceeds the maximum rate fixing, the
cap is deactivated for the fixing in question.
Collar A collar combines the purchase of a cap (premium to pay) and the sale of a floor
(premium to receive) in order to reduce (or even eliminate - this is then called "zero
cost collar ") the premium paid to purchase the cap.
Commercial paper (BT) Commercial paper represents a debt which takes the form of a title. The title is issued
on a discounted basis (reference : Euribor). It is issued by a private company or a public
entity other than a credit institution to raise capital in the short term (less than one
year duration). The Brussels-Capital Region has a commercial paper program for the
short term (1 day to 1 year) which is since 3 April 2009 included in the MTN Program.
The maximum amount of the program amounts to 3 billion € since 1 January 2014.
Consolidation Loan Consolidation Loan is the operation which consists in making a portion of the short-
term debt (<1 year) pass in long-term debt (> 1 year) either at variable or fixed rate.
Fixed term advance (ATF) Fixed advance (ATF) The fixed advance is a loan on a repayment to a fixed deadline. It is
intended to fund cash needs. The Brussels-Capital Region has lines of fixed-term
advances from 1 day to 1 year with the cashier of the Region, and for more than 30
days with various banks.
Floor A floor is an OTC contract between two counterparties that allows the buyer, by the
payment of a premium (as a percentage of nominal), to hedge against a fall in interest
rates in excess of a floor rate. This is a set of options on successive maturities of
interest rates (roll-over system).
At each fixing, the rate level is compared to the exercise of the floor price. If the rate is
lower than the exercise price, the buyer receives from the seller of the floor the rate
differential times the nominal amount prorated to the number of days in the period. If
the rate is higher than the exercise price, the option will not be exercised.
Forward interest rate swap Forward rate swap works the same way than IRS except that the IRS the starting date
of the swap is not the date the swap is contracted. The starting date of the swap is set
at a future date (forward).
FRA (Forward Rate
Agreement)
The FRA is an OTC contract (no premium to pay) between two counterparties that
guarantees, as soon as it is concluded, an interest rate on a loan or a future investment
on the money market from one month to one year maturity.
A borrower freezes the cost of its future debt by buying the FRA (protection against
rising interest rates), a lender will provide a guaranteed rate of investment by selling
FRA (protection against a rate cut).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 86
The counterparty insures a borrowing (buyer) or lending (seller) rate known in advance
but waives the benefit of any decrease (the buyer) or increase (the seller) in rates.
The maturity of the FRA is equivalent to the starting date of the guarantee. At that
time, the value of the reference rate (Euribor) is compared to the guaranteed rate
(FRA).
IRS (Interest Rate Swap) IRS (Interest Rate Swap) An IRS is an interest rate swap. This is an operation of
exchange of interest flows, denominated in the same currency. It allows, for a specified
period, to exchange a cash flow schedule with a counterparty, this schedule
representing a debt and the other an investment (known as the two legs of the swap).
There are three variants of swap:
- variable rate to a variable rate (basis swap);
- fixed rate to variable rate (standard swap);
- variable rate to fixed rate (standard swap).
A counterparty will either be payer (the fixed rate is paid for it is borrowed and the
variable rate received because it is lent) or receiver (the variable rate is paid for it is
borrowed and the fixed rate received because it is lent).
Swaption Contraction of “swap” and “option”. The swaption is an option on a swap. It allows to
buy (call swaption) or sell (put swaption) the right (not the obligation) to enter into an
interest rate swap at a certain date (European swaption) or over a certain period
(American swaption ). The characteristics of the swap are fixed in advance (notional
amount, starting and maturity dates, reference rate).
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 87
INDEX
CHARTS
Chart 1 : The minimum bid rate for the main refinancing operations .................................................................. 22 Chart 2 : Total Direct Debt Outstanding 1991-2016 on 31 December (in million €) ............................................. 23 Chart 3 : Differential between the annual average outstanding and outstanding on 31 December (in thousand €) .............................................................................................................................................................................. 24 Chart 4 : Euribor rates 3, 6, 12 month maturities................................................................................................. 25 Chart 5 : IRS rates evolution between 2008 and 2015 .......................................................................................... 26 Chart 6 : Weighted monthly average cost of the Direct debt (2014-2016) ........................................................... 27 Chart 7 : Evolution of duration (at end of month) and weighted monthly average cost (1998-2016) .................. 28 Chart 8 : Evolution of the structure of the debt on 31 December 2015 (left) and on 31 December 2016 (right) .. 29 Chart 9 : Funding 2016 by source (left) and origin (right) ..................................................................................... 32 Chart 10 : Long term funding source in 2016 (mean maturities) .......................................................................... 33 Chart 11 : Funding source : by amount (left) and by average duration (right) ..................................................... 34 Chart 12 : Derivatives breakdown by bank (left) and by product category (right)................................................ 34 Chart 13 : Rating of banking counterparties by funding (left) and by derivative (right) ....................................... 35 Chart 14 : Weighted monthly distribution (number of days in month) of the floating debt in 2016 .................... 37 Chart 15 : Annual issuance volume of CP (treasury bills) at nominal value .......................................................... 40 Chart 16 : Annual average outstanding of CP (treasury bills) 2001 - 2016 ........................................................... 40 Chart 17 : Distribution of total movements in 2016 .............................................................................................. 45 Chart 18 : Distribution of the average outstanding of own and transit accounts in 2016 .................................... 45 Chart 19 : Evolution of the global financial outstanding of the FCCB ................................................................... 46 Chart 20 : Evolution of the net financing needs outstanding of institutions for 2017 .......................................... 47 Chart 21 : Evolution of quality – treasury plan FCCB ............................................................................................. 48 Chart 22 : Amortization schedule of the consolidated debt (2017-2021) ............................................................. 51 Chart 23 : Cumulated amortizations of the consolidated debt (2017-2021)......................................................... 52 Chart 24 : Financing and refinancing requirements (2017-2021) ......................................................................... 53 Chart 25 : Change in the structure of the Direct debt, including the FCCB and the Fixed rate consolidations (31.12.2017 - 31.12.2021) ..................................................................................................................................... 54 Chart 26 : Evolution of the outstanding of liabilities guaranteed by the Region .................................................. 59 Chart 27 : Distribution of the total guaranteed debt between the benefiting companies for 2016 (in %) ........... 62 Chart 28 : Total Direct Debt outstanding 1990-2016 on 31 December (in million €) ............................................ 68 Chart 29 : Evolution of the Indirect Debt on 31 December (in thousand €) .......................................................... 70 Chart 30 : Regional Debt stricto sensu outstanding on 31 December (in thousand €).......................................... 71 Chart 31 : Evolution of the Regional Debt consolidated under the ESA95 norm (in thousand €).......................... 73 Chart 32 : Evolution of the (Total Debt/Total receipts) ratio on 31 December under ESA95 norm ....................... 73 Chart 33 : Evolution of the Regional Debt consolidated under the ESA2010 norm (in thousand €)...................... 74 Chart 34 : Evolution of the (total debt/total receipts) ratio on 31 December ....................................................... 75 Chart 35 : Average monthly financing cost (weighted by average outstanding) of the Total Direct Debt (1997-2016) ..................................................................................................................................................................... 76 Chart 36 : Portfolio structure history (on 31 December) ....................................................................................... 77 Chart 37 : Amortization schedule of the consolidated debt (2017-2044) ............................................................. 78 Chart 38 : Cumulated amortizations of the consolidated debt (2017-2044)......................................................... 78
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 88
TABLES
Table 1 : Debt statistics of the Brussels-Capital Region as of 31 December (in million € or in %) ........................... 9 Table 2 : History of the structure “inflation” ......................................................................................................... 10 Table 3 : Gross consolidated debt (« Maastricht ») and creditor balance of S1312 institutions .......................... 12 Table 4 : (Total debts/total income) ratio ............................................................................................................. 12 Table 5 : Evolution of the Euribor rates between 2015 and 2016 ......................................................................... 25 Table 6 : IRS rates evolution between 2015 and 2016 .......................................................................................... 25 Table 7 : Structure of the portfolio as of 31 December 2016 ................................................................................ 29 Table 8 : Evolution of the regional portfolio's sensitivity ...................................................................................... 30 Table 9 : Market rate (zero coupon) sensitivities at 31 December 2016 ............................................................... 31 Table 10 : Debt service coverage ratio .................................................................................................................. 32 Table 11 : Accrued financial charges in 2016 in € for the short-term debt(< 1 year) ............................................ 38 Table 12 : 20 regional institutions are participating in the FCCB .......................................................................... 44 Table 13 : Evolution of the global financial outstanding of the FCCB ................................................................... 46 Table 14 : Distribution of the subsidy for good financial management ................................................................ 49 Table 15 : Refinancing and new financing (2017 - 2021) ...................................................................................... 54 Table 16 : Macroeconomic scenario of future real rates with defensive consolidations ...................................... 55 Table 17 : Guarantees authorized and granted in 2016 ....................................................................................... 60 Table 18 : Use, cash calls and outstandings .......................................................................................................... 61 Table 19 : Total Direct Debt outstanding on 31 December (in thousand €) .......................................................... 67 Table 20 : Indirect Debt outstanding on 31 December (in thousand €) ................................................................ 69 Table 21 : Regional Debt stricto sensu outstanding on 31 December (in thousand €) .......................................... 70 Table 22 : Debt outstanding under ESA95 standard (in thousand €) .................................................................... 72 Table 23 : Debt outstanding under ESA2010 standard (in thousand €) ................................................................ 74 Table 24 : Portfolio cost of funding history ........................................................................................................... 75 Table 25 : Portfolio duration history ..................................................................................................................... 76 Table 26 : Guaranteed debt outstanding on December 31 (in thousand €) .......................................................... 79 Table 27 : Consolidated debt loans ....................................................................................................................... 80
Annual Report 2016 of the Brussels Capital Region’s Debt Agency 89
Regional web portal :
Annual reports published in recent years by the Brussels-Capital Region, as well as the latest press
release from Standard & Poor's, are available for download on the website of Brussels Finance and
Budget :
http://finances-budget.brussels/agence
http://financien-begroting.brussels/agentschap-3
For more information:
Mr Faenza
T +32 (0)2 204 25 85
F +32 (0)2 204 15 57
Address:
Service Public Régional de Bruxelles
Bruxelles Finances et Budget – Agence de la Dette
(à l’attention de M. Faenza – CCN 8/18)
Rue du Progrès, 80/1
1030 Bruxelles
Editor:
Dominique Outers, Director-Head of Debt Agency Office – May 2017
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