Financial institutions have started offering higher interest rates to city councils in recent years. province of Alicante To prevent them from depositing their treasure remnants in the bank Bank of Spain. In this way, they plan to reverse a decision that some Alicante municipalities, such as Villena, have already begun to adopt in pursuit of greater profits for public funds.
By the beginning of the year, private banks offered the City Council a return of 0.70%, while the Bank of Spain or the national central bank accepted it at 1.90%. A round operation that takes place From paying 40,000 Euro commission to financial institutions per year to receiving 300,000 Euro year. In the city report Treasure In January, it was warned that the current situation of continuous increases in interest rates in recent months is causing financial companies to pay the positive balances of the checking accounts they hold. But until then, only one bank had offered such a payment to the Villena City Council. Also, a kind of 1.2% daily floating interestreaching v at that time0.70% true value.
All macroeconomic variables indicated that this practice would be so widespread that, faced with this situation, the local government team led by PSOE-Los Verdes Socialist mayor Fulgencio Cerdán– made an inquiry to the Bank of Spain, which was interested in the possibilities and conditions of opening an account.
1.90% interest
The response from Madrid cleared all doubts by offering a commission-free interest rate of 1.90%. However, this was not the only advantage. As with other financial institutions, the type offered is not discounted; the interest paid goes back to the public sector and there is no risk of bankruptcy owned by financial institutions that could lead to loss of deposits in the worst case.
It was February the year the mayor, Fulgencio Cerdán, allowed opening an account with the Bank of Spain. 25.000 Euro interest per month. The aim was to get the maximum economic return from a municipal fund. 18 million € given the low profitability offered by the bank.
Have Villena Financial Advisor Juan José OlivaresHe later became aware of the decision to open an account on behalf of the City Council at the Bank of Spain to deposit a significant portion of the Treasury balance.
“He will report to the city coffers on the interest rate he has offered us. 25.000 Euro per monthIt certainly represents a considerable amount that justifies our decision to take,” he said before the mayor.
From payment to collection
Since then, Consistory has stopped paying interest to buy it. “And this will allow us to increase our resources and our ability to continue to finance projects of municipal interest,” said Villena finance manager. public institutions. In addition, when the interest rate offered to public institutions is added, we see that the bankruptcy risk of commercial and private institutions is minimized. very advantageous». However, Olivares also wanted to convey a politically profound message: “If rates rise for mortgage holders, they should increase accordingly for savers.” Something that is certainly not the same.
In order not to lose business, commercial banks are already offering these days 2.6% return per year. However, by applying a floating interest rate, the real value can fluctuate above or below the 1.90% recommended by the national central bank. The principals have already contacted some town halls in the state. in handwith treasure remnants 20 million.
Those in charge of the major private finance companies reacted quickly to stay out of business.market for money trading. They are aware that the Public Administration is a safe value and that the municipality’s coffers are full with the economic management and cost reduction conditions imposed by the Ministry of Finance in recent years. Therefore, they began to provoke city halls. high profitability for your deposits. Too much money is at stake and they know it. There are only twelve municipalities in the province. 141 is currently registered, exceed Treasure remains of 360 million euros.
For Rubén Alfaro, mayor of Elda and president of the Valencian Federation of Municipalities and Provinces, depositing money from the municipal coffers into the Bank of Spain “can be a very useful tool for improving the condition of the treasury of local governments.” According to him, “the acquisition of public debt securities, which is a procedure connected with the opening of an account with the Bank of Spain, It is another option that needs to be evaluated and compared to choose the most useful one.». In any case, Alfaro confirmed to this newspaper that the profitability figures that private banks now offer to city councils to attract their capital have increased dramatically.
It’s only been six months since I stopped taking commissions and now interest rates are rising. Money always seeks money.
double reading
Finance and Treasury experts warn The double reading that treasure relics have. Having a lot of money in the municipal or provincial coffers may result from good economic management that produces surpluses, or, conversely, it may be a direct result of non-budgetary implementation of expenditures and investments. To know whether there is one or the other option, it is enough to analyze whether it exists. real and important needs for a long time in that municipality or province. It is counted if any definite symptom someone’s lack of budget implementation. Another point that they overlap in emphasizing is, Money in the bank rents but gives jobs on the street and drives the economy of cities and towns. However, the health of the municipal coffers is another requirement of the citizen and lays the foundations of good management. yin and yan.
TREASURY REMAINED
Alicante 80 million euros
-Torrevieja: 67 million euros
-Orihuela 59 million (year 2021)
-El Campello 33 million
-Saint Vincent 27 million
-Elche 21.9 million euros
-20 million on hand
-Villa 18 million euros
-Benidorm 12.1 million (year 2021)
-Peter 9.5 million
-Heart 8 million euros
-Cocentaina 6.6 million euros