Kommuninvest's operational policy for borrowing, investment, derivatives and lending brings together strategic and tactical considerations, as well as limits for borrowing, investment, derivative and lending operations.

The principal purpose of the company's operations is to achieve efficient long-term conditions for the financing of investments made by the members and the companies they own. This is to be achieved with risks being minimised. As the starting point, lending is financed on a portfolio basis since minimising risks individually for each transaction would be difficult to implement given the volumes that Kommuninvest handles. To sustainably ensure that liquidity needs are met, borrowing shall exceed lending.

The policy is set annually by the board of directors of Kommuninvest i Sverige. The President is responsible for the policy being adhered to and developed. The Head of Funding & Treasury is responsible for proposing annual revisions to the policy and, when necessary, bringing necessary amendments to the fore also at other times.

The policy includes the following principles:

Credit risk

• Lending to members only and to municipal companies guaranteed by a member.

• Strict methods for assessing and analysing applications for membership. 

• Each member's credit standings monitored on a continuous basis.

• Liquidity invested in highly rated assets only.   

• 0 or 20-percent risk-weighted assets.

• Investments made only in securities issues by counterparties with an A (Standard & Poor's) or A2 (Moody's) rating or better.

• Credit restrictions on derivatives counterparties:

• Rating A/A2 or better (Standard & Poor's/Moody's). If the rating for an approved derivatives counterparty exceeds A/A2 but is lower than AA-/Aa3, Kommuninvest is only permitted to enter interest and currency swap agreements.

• ISDA agreements are to be established with all derivatives counterparties and CSA agreements are also sought. ISDA agreements convey the right to prior redemption if the creditworthiness of the counterparty worsens, and permits netting of positive and negative exposures. CSA agreements regulate the right to secure collateral to eliminate the exposure arising through derivative transactions.