Advances in Risk Management of Government Debt

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05 Aug 2005
9789264104433 (PDF) ;9789264104419(print)

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Advances in Risk Management of Government Debt is a landmark study about risk management practices of OECD debt managers. Risk management has become an increasingly important tool for achieving strategic debt targets, and is now an integral part of a wider strategic debt management framework based on benchmarks in most jurisdictions. However, this study shows that the extent and sophistication of risk management vary widely across countries. 

This study brings together a number of recent reports on best practices for managing market risk, credit risk, operational risk and contingent liability risk. It was prepared by a group of authors from the OECD Working Party on Public Debt Management, and includes case-studies of risk management practices in selected OECD debt markets.

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  • Introduction to Advances in Risk Management of Government Debt
    This chapter provides an overview of the key policy issues addressed in the new landmark OECD study, Advances in Risk Management of Government Debt. Risk management has become an increasingly important tool for achieving strategic debt targets, and is now an integral part of a wider strategic debt management framework based on benchmarks in most OECD jurisdictions.
  • Overview of Risk Management Practices in OECD Countries
    This chapter provides a summary overview of risk management practices by OECD debt managers. Although the overview shows that the extent of risk management varies widely across countries, the majority of OECD countries are actively engaged in risk management, with risk typically not managed on a consolidated basis across all government entities.
  • Analytical Framework for Debt and Risk Management
    The overall purpose of this chapter is to discuss the analytical framework for risk management, and how interest-rate risk management is implemented in practice. While there is agreement on the basic principles of sound and prudent risk management, various approaches exist for the assessment and management of interest-rate risk.
  • Recent Developments in the Management of Market Risk

    Until recently, the focus of OECD government debt managers was on developing the domestic market, while debt management was in general confined to ensuring suitable on-the-run issues. However, in recent years the importance of risk management has increased among OECD members.

  • Management of Operational Risk by Sovereign Debt Management Agencies
    This chapter outlines the main issues and themes to emerge from responses by selected OECD sovereign debt managers to a questionnaire regarding operational risk. With a view to limiting the administrative burden, seven working group members were asked to provide answers to the questionnaire.
  • Explicit Contingent Liabilities in Debt Management
    This chapter, prepared by an ad hoc experts’ group of the OECD Working Party on Debt Management, deals with best practices for the issuance and management of explicit contingent liabilities. Contingent debts are in many ways similar to conventional government debt instruments.
  • Risk Management of Government Debt in Austria
    The principal objective of public debt management is the minimisation of costs subject to a given level of risk. Costs are measured overall as the total costs (interest payments plus/minus the change in Net Present Value – NPV), whereas the contributing interest payments are also reported and evaluated separately in the risk management framework.
  • Risk Management of Government Debt in Belgium
    The principal objective of government debt management in Belgium is to minimise the financial debt service cost, subject to certain constraints imposed by the management of related risks, as well as by the general objectives of budgetary and monetary policy.
  • Managing Risks in Canada's Debt and Foreign Reserves
    Risk management practices in Canada in recent years have developed in an environment characterised by a large but declining stock of debt and an increase in foreign reserves.
  • Risk Management of Government Debt in Denmark
    This chapter gives an overview of risk management of the Danish central-government debt. Firstly, the overall framework for centralgovernment debt management is described, followed by considerations with respect to management of market risks in relation to the principle of asset and liability management and the implementation of the borrowing strategy.
  • Risk Management of Government Debt in Finland
    The legal basis for debt management in Finland is derived from a parliamentary authorisation through which the Ministry of Finance submits a proposal to the Council of State authorising the State Treasury to carry out borrowing as an agent of the Ministry of Finance on behalf of the Republic of Finland.
  • Risk Management of Government Debt in France
    Agency France Trésor (AFT) was established in 2001 as a government department within the Ministry of Economy and Finance, and is chaired by the Head of the Treasury. Its role is to manage the debt and treasury of the State at the lowest cost to the taxpayer. Although mostly long-term in perspective, this function must be fulfilled with the highest possible degree of risk control.
  • Risk Management of Government Debt in Portugal
    The management of the public debt portfolio, as any other financial portfolio, involves the assumption of risks (liquidity, market, credit and operational risks).
  • Risk Management of Government Debt in Sweden
    The core principles and rules for central government debt management in Sweden are given in the Act on State Borrowing and Debt Management. The government’s right to borrow is based on an annual authorization from Parliament, which is given as part of the decision on the state budget for the subsequent fiscal year.
  • Risk Management of Government Debt in the United Kingdom
    The UK Debt Management Office (DMO) was established on 1 April 1998. The DMO’s brief is to carry out the Government’s debt management policy of minimising financing costs over the long term, taking account of risk, and to manage the aggregate cash needs of the Exchequer in the most cost-effective way, in both cases consistently with the objectives of monetary and any wider policy considerations.
  • Risk Management of Government Debt in the Czech Republic
    The growth of public budget deficits of the Czech Republic is becoming one of the most serious issues in the coordination of macroeconomic policies of central authorities. Decision-making about ways of funding domestic budget deficits is getting more and more complex.
  • Risk Management of Government Debt in Poland
    Developments of public debt management since 1989 Public debt management in Poland has a relatively short history. It begins with the political and economic transition started by the collapse of the communism in 1989. Since then, the structure of public debt and its management, including the institutional and market environment, have changed dramatically.
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