Concentration & liquidity red flags
About this course
Quick checks any councillor can do - bank exposure, maturity bunching, MMF concentration. Real warning signs.
What you'll learn
- Why red flags matter
- Concentration
- Liquidity
- Borrowing-side
Part of these pathways
Related courses
- Council money in plain English
- Treasury management for councillors
- Your responsibilities as a councillor
- Meet your council
- Reading the Metrics dashboard
- Reading the quarterly & outturn reports
Common questions
What is Concentration?
Too many eggs in one basket. In treasury terms: too much money with one bank, one MMF, one type of investment, or one maturity date. Diversification is the antidote.
What is Counterparty?
Whoever the council is depositing money with (a bank), buying an investment from, or borrowing from. Each counterparty carries some risk; concentration with any one counterparty multiplies that risk.
What is Liquidity?
The council's ability to pay its bills as they fall due. Distinct from solvency — a council can be financially solvent (assets > liabilities) but illiquid (no cash on the day a salary run is due).
What is Liquidity ladder?
An investment portfolio structured so that maturities arrive in a sequence that matches expected outflows — some money available tomorrow, some next month, some at three months. Avoids being over-locked-up.
What is Maturity bunching?
When too much debt comes due in the same year (or short window). Forces the council to refinance a large chunk all at once at whatever rates prevail then. Refinancing risk concentrated rather than spread.
What is Minimum operating balance?
The cash floor below which the council's working balances should not fall. Typically 1 month of essential outflows (payroll + utilities + critical suppliers). Self-imposed; defended by the same-day investment layer.