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Northern Territory Treasury Corporation Annual report 2013-2014



Northern Territory Treasury Corporation Annual report 2013-2014


Department of Treasury and Finance reports; Reports; PublicationNT




Made available via the Publications (Legal Deposit) Act 2004 (NT).




Northern Territory Treasury Corporation -- Periodicals; Finance, Public -- Northern Territory -- Periodicals

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Dept. of Treasury and Finance

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64 Northern Territory Treasury Corporation Notes to the Financial Statements For the financial year ended 30June2014 Note 16 continued NTTCs dealings in physical securities and/or derivative financial instruments are transacted only with counterparties possessing strong or extremely strong credit rating criteria as determined by Standard&Poors rating group. In addition, derivative financial instruments are only transacted with counterparties that have signed an International Swaps and Derivatives Association (ISDA) Master Agreement. The credit risk arising from funds advanced to loan counterparties is considered minimal, as loans are only advanced to counterparties within the Northern Territory public sector, as directed by the Treasurer. Accordingly, ultimate responsibility for loans advanced by NTTC lies with the TerritoryGovernment. The Standard&Poors credit rating criteria are not applied to loan counterparties. In the case of recognised financial assets, the carrying amount of the assets recorded in the Statement of Financial Position represents NTTCs maximum exposure to credit risk. (d) Liquidity Risk Liquidity risk is the risk of financial loss and/or increased costs due to unanticipated events or errors in cash flow forecasts, which result in additional borrowing costs, reduced investment income, or an inability to meet financial or operational commitments as they fall due. NTTCs exposure to liquidity risk may arise due to inadequate or inaccurate communication of actual cash flows and the need to fund unanticipated operating cash requirements when an insufficient cash balance forces NTTC to liquidate investments and/or utilise backup funding facilities at higher costs. NTTC seeks to ensure that adequate cash reserves and/or funding sources are available at all times to meet its short-term commitments as they arise. NTTCs approach in minimising liquidity risk involves diversification of physical borrowing and investment activities across the maturity spectrum and utilising a variety of funding sources to meet NTTCs requirements. In addition, NTTC at all times maintains: minimum cash balances; a committed overdraft facility; an uncommitted short-term borrowing program via NTTCs promissory note facility; a diverse list of counterparties; and its borrowing exposures in a manner that avoids undue reliance on any one counterparty. (e) Funding Risk Funding risk refers to the medium to long-term risk that NTTC may be unable to raise funds when required or at a cost that is substantially higher than could be achieved under normal market conditions. Funding risk typically relates to periods greater than one year, whereas liquidity risk relates to periods less than one year. The objective of funding risk management is to ensure that NTTC is not exposed to a significant refinancing risk in any financial year. NTTCs approach to minimising funding risk involves diversification of physical borrowing and investment activities across the maturity spectrum and utilising a variety of funding sources to meet its requirements.