Transparency and communication:
Latvia`s experience
Prepared for Debt Management Facility Stakeholders’ Forum June 3-4, 2015
Manila, Philippines
Inese Sudare Deputy Director
Financial Resources Department
2
Territory: 64,569 sq. km
Population: 2 million
Capital: Riga
Currency: Euro
Borders: Estonia, Lithuania, Russia, Belarus
Main facts:
1918 – proclamation of the Republic of Latvia
1991 - Latvia Regains Independence
1991 - Becomes a Member of the UN
2004 - Entry into EU
2004 - Admitted to NATO
2014 - Latvia joins Eurozone/ EMU
2015 - Latvia’s Presidency of EU Council
June, 2015
A/A2
A-/A3
BBB+/Baa1
BBB/Baa2
BBB-/Baa3
BB+/Ba1
BB/Ba2
BB-/Ba3
Short Overview Of Latvia - a Country In The Baltic Region of Northern Europe
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S&P
Fitch
Moodys
R&I
LATVIA
Sovereign rating development
Jelgava
Rezekne
Valmiera
Daugavpils
RIGA
Investor Relation Activities Are Integrated In The Treasury Debt Management Function
3 June, 2015
Treasury - institution subordinated to the Ministry of Finance with following functions:
Source: The Treasury
Borrowing management
Debt portfolio management
Communication with investors, banks, rating agencies and IFI
Issuance and monitoring of state guarantees
Government debt management activities includes:
Law on Budget and Financial Management
Annual State Budget Law
Regulations of the Treasury
Internal Regulation for the Treasury Authorisation
Central Governmental Debt Management Strategy
Cash Management Strategy
Medium Term Funding plan
Communication strategy
Main legal documents for the Treasury: Investor relations are performed
mainly by International Cooperation department
(3 persons for IR)
Medium Term Framework Document Provides Guidance for Main Objectives and Tasks in Debt Management
4 June, 2015
Latvian Government Debt Management Strategy Objective:
to ensure availability of financial resources at the lowest possible costs, limiting financial risks and taking into account the development of the
Latvian economy and integration of the domestic financial market into the common financial market of the Eurozone
Central Government Borrowing
Management
Central Government Debt
Portfolio Management
Ensure continuous
borrowing opportunities in the international
and domestic financial markets on optimal
terms and conditions
Optimising debt servicing costs
over the long term while
hedging financial risks
Regular (monthly) monitoring of the implementation
Annual reports to the Minister of Finance
Strategic Approach In Organizing Sovereign Borrowing
5 June, 2015
FLEXIBILITY IN BORROWING ACTIVITIES
With regards to timing, currency
and tenors
INVESTOR BASE DIVERSIFICATION
maintain regular communication with the investor community;
consistency and transparency to markets
TAKE ADVANTAGE OF THE
DOMESTIC MARKET POTENTIAL
Investment instruments available for domestic investors; Primary dealers system
MAINTAIN AND BROADEN THE
LIST OF COUNTERPARTIES
Treasury has necessary
counterparties to conclude financial transactions
Principles and tasks
in borrowing management defined in the Debt
Management Strategy
Medium Term Funding Plan
Annual Communication Action Plan
interest rate forecasts different scenarios
and instruments to cover financing needs
activities, responsibilities and expected results
Diversification of investor base is achieved throughout issuances
6 January, 2015
Investors by geography of bond issues in international capital markets
0
200
400
600
800
1 000
1 200
m.E
UR
Non-residents Residents
Investor base by residence of the securities issued in domestic market
7 January, 2015
Approach in communication may vary depending of investor/counterparty segment
Segment
Information
Channel
Banking society
Investors community
Retail investors
Rating Agencies
Websites
Phone, email contacts, regular c-calls
Bilateral meetings
Bloomberg
STATISTICS WEEKLY UPDATES BUDGET EXECUTiON, BORROWING PLANS ANALITICAL REPORTS, PUBLICATIONS
Websites
One-to-one or group meetings
Bloomberg
Specific website
TV, press
Handouts
Websites
Bilateral meetings
Phone and email contacts, conference calls per request
PRESENTATION (ON MACRO, FISCAL, FINANCIAL AND POLITICAL SITUATION)
MACRO, FISCAL, FINANCIAL AND POLITICAL SITUATION
FINANCIAL CONDITIONS AND LEGAL ASPECTS OF RETAILPRODUCT
PROCEDURE FOR INVESTING
Accrual accounting in compliance with International Public Sector Accounting Standards(IPSAS)*
* Except for tax revenues
Communication with the investor community across different regions and countries
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Purpose:
Credit update / non-deal related meetings
Deal related Road show
Investors:
Previous Current Potential
Investor meetings held in 2011-2014
Boston
New York
San Francisco
Los Angeles
UK (London)
Germany (Frankfurt, Munich)
France (Paris)
Austria (Vienna)
Netherlands (Amsterdam, Hague)
Italy (Milan)
Switzerland ( Zurich, Basel, Bern, Geneva)
Singapore
Tokyo
Hong Kong
June, 2015
Year Investor meeting in
different regions
Total number of investors
met during 2011-2014 is
more than 200
2011 Europe, USA, Asia
2012 Europe, USA, Asia
2013 Europe
2014 Europe
Regularity in Communication Activities Is Maintained Throughout a Year
9 June, 2015
Treasury publications:
1. Weekly updates
2. Monthly updates of investor presentation
3. Quarterly debt management bulleting
4. Annual report on debt management
10
Consistency In Being Transparent Starting From Policy Planning To Individual Transaction
Disclosed in publicly available fiscal policy framework documents
Borrowing strategy in medium term
Results of auctions / syndicate transactions
• Announcement after each transaction • Market Review published within a day • Bloomberg
Calendar for auctions in domestic market
• Quarterly plans discussed with Primary Dealers • Monthly calendar publicly available • Announcement few days prior the auction • Bloomberg
Legal base/auction technics, procedures
Regulations and auction technics/procedures publicly available
List of Primary dealers published
Official reports and reviews
• Monthly • Quarterly • Annual
June, 2015
* Availability in websites of the Treasury, Ministry of Finance , Stock Exchange, as well as Bloomberg
How To Measure The Value Of Investor Relations: Treasury experience
11 June, 2015
Achievement of set targets (strategy, plans)
Hit ratio (meeting in deal and non deal Road shows vs demand and allocation)
Tracking the changes in investor base
Number or addressees in mailing list
Comments/feedback (from counterparties banks, primary dealers, investors)
Conclusions
12 January, 2015
Benefits of IR for Issuer
• IR helps to reach strategic goals
• Regular communication and transparency increases investors trust
• Raises investors interest in investing in government debt securities
• Facilities lower debt servicing costs in long term
• Investment into investor relations may pay off in «hard times»
Benefits of IR for Investor
• Improves awareness of the country
• Helps to distinguish the issuer among peer countries
• More accurate sovereign credit risks assessment
• Supports analysis and decision making process about further investments
Key elements: Openness, Transparency and Consistency
THANK YOU !
For more information, visit Treasury website
www.kase.gov.lv
13 June, 2015