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INTOSAI Working Group on Public Debt - guidelines for risk management of public debt and assets

This document provides comprehensive guidelines for managing the risk associated with public debt and assets. It emphasizes the importance of financial skills, optimizing debt portfolios, monitoring currency risks, and using derivatives effectively. It also covers risk management methods and practices for limiting and controlling financial risks, establishing limits and reporting systems, and managing assets through diversification and performance measurement.

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INTOSAI Working Group on Public Debt - guidelines for risk management of public debt and assets

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  1. INTOSAI INTOSAI Working Group on Public Debt - guidelines for risk management of public debt and assets

  2. Debt management • Sufficient financial skills as an absolute necessity • Optimizing of debt portfolio: fixed interest, variable interest • use of other currencies only when clear advantages of interest payment; daily monitoring of curreny risks with clear limits

  3. Derivatives (Swaps, futures, ...) • use only to optimize the structure of the portfolio (for example the proportion of fixed to variable interest payments) • Do not use more volume of (netted) derivatives than you have debt • use only standardized products • measure the risk (for example with use of Value at Risk-Models)

  4. Risk Management • use appropriate methods to limit and control financial risks (for example Value at Risk, Cashflow at Risk, Modified Duration) • establish a system of limits for maximum debt, maximum volume of swaps, maximum Value at Risk, ... • establish monthly reports • Be cautious with financial instruments with complex structures

  5. Asset Management • Make clear which asset classes can be used and which not • Take care that sufficient diversification is achieved • Measure the performance of the portfolio at least once a year • Check the achieved performance with an appropriate benchmark • The portfolio with the lowest standard deviation for a given return is recognised as the most diversified

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