Liquidity Management

Based on the Act No. 218/2000, Coll., Budgetary Rules Act and Some Related Acts Amendment Act as amended on 1 January 2001, the CZK-denominated treasury single account was established as fundamental technical tool for effective liquidity management of the state treasury and financing during the year.

Since the entry into force of the Budgetary Rules Act the treasury single account included the revenue and expenditure accounts of the state budget, state financial asset current accounts, current accounts of tax and customs authorities and the state treasury liquidity management account.

On 3 October 2005, the treasury single account was expanded to include the accounts of reserve funds and funds of cultural and social needs of state organizational units.

As of 1 February 2012, it also includes the extra-budgetary privatization account of the former National Property Fund.

On 1 January 2013, the key amendment to the Budgetary Rules Act came into force, which significantly expanded the CZK-denominated treasury single account and allowed the administration of treasury single account in foreign currencies, whereas this year the Czech National Bank technically established an account in EUR on 2 April 2013.

Based on the amendment to the Budgetary Rules Act, it is possible to distinguish two types of clients, whose accounts are subordinated to the treasury single accounts, depending on the options available to these clients in managing their cash resources and their payment accounts opened with the Czech National Bank. “Mandatory clients” are not authorised to keep accounts with commercial banks and all of their cash resources have to be transferred to accounts opened with the Czech National Bank, which entirely disables the transferring of these cash resources outside of the state treasury, and thus creates a relatively stable source of central state liquidity, which can be involved in funding of state. The second group of clients consists of “non-mandatory clients”, who open mandatory payment accounts at the Czech National Bank designated only for receiving cash resources from the state budget, state funds of the National Fund, whereas they are not limited in terms of transferring the acquired cash resources from the accounts subordinated to the treasury single accounts to any other bank.

As at 1 January 2013, the treasury single accounts have been expanded to include all cash resources on the accounts of mandatory clients, i.e. state funds and the Czech Republic Land Fund, the National Fund, state contributory organisations with a five-year transition period and external funds of state organisational units, as well as cash resources on the accounts of non-mandatory clients designated for receiving cash resources from the state budget, state funds and the National Fund for local government units and voluntary associations of municipalities, regional councils of the cohesion regions, public research institutes, public universities, the Railway Infrastructure Administration and other legal entities, opened with the Ministry’s consent.

Effective as from 10 May 2016 there has been a key extension of the treasury single accounts. The treasury single accounts have been extended by the accounts of General Health Insurance Company of the Czech Republic including the special account of public health insurance, accounts of departmental, professional, corporate and other health insurance companies, and the associations of health insurance companies, which thus became the mandatory clients of state treasury. At the same time, the Railway Infrastructure Administration state organisation transited from the non-mandatory regime to mandatory one.

Treasury single accounts are administered by the Czech National Bank as a paying agent of the Czech government. This accounts are not allowed to show a debit balance.

The reasons for establishing of the treasury single accounts were following:

• inclusion of surpluses of all the accounts of the state treasury in the financing within a year,
• minimization of the liquidity risk of the state,
• effective planning of the issuance activity and lending operations, thus minimizing interest costs.

Repo operations are the most common instrument used for the purposes of cash management of the treasury single accounts. Repo operations are collateralized investments due within two weeks, with T-bills or Czech National Bank bills used as collateral. Overnight depo operations are another instrument that is also used. In case of shortages of cash resources, loans in form of repo or depo operations are available.

The Ministry of Finance buys T-Bills into its own portfolio, in order to be able to use them as collateral for loans in form of repo operations in case of negative development of the state budget and/or the financial markets.