The UK's Municipal Bonds Agency

This page is no longer the most update resource on the Municipal Bonds Agency. For the latest news please visit the Agency's website –

The UK's Municipal Bonds Agency (Local Capital Finance Company) exists for a single purpose: to reduce councils' capital costs over the long term. It will do this by:

  • raising money on the capital markets through issuing bonds;
  • arranging lending or borrowing directly between local authorities;
  • sourcing funding from other third party sources such as banks, pension funds and insurance companies.

It aims to lend to eligible councils at a lower rate than the PWLB or than if the councils were to issue their own bonds.  This lower rate will be attained by:

  • achieving a sovereign-like credit rating through a joint and several guarantee (see section 6 of the business case);
  • issuing bonds in benchmark sizes of £250 million to £300 million;
  • sourcing capital at low interest rates from third parties, such as the European Investment Bank.

There are also other important factors for councils to consider beyond price:

  • reducing exposure to shifting government lending policies through increased competition and diversity of lending sources;
  • creation of a potential new mechanism for prudent investment by pension funds in local government infrastructure;
  • increased transparency and borrowing: while the PWLB processes are very efficient, they don't carry the normal level of scrutiny lending large sums of money would entail.  Experience in other countries has shown that an Agency's credit processes aligned with the incentive of lower borrowing costs, and the oversight of peers, has strengthened the overall credit worthiness of councils;
  • the creation of a centre of expertise at the intersection between capital markets and local government finance;
  • tailored flexibility evolving from the development of the centre of expertise.

The proposals are grounded in the prudential code and the revised business case reinforces the principle that borrowing by councils must be prudent and affordable.  In developing the revised business case, we met with six of the top ten leading sterling syndicate banks, with whom we maintain links and the consensus remains that there is likely to be significant demand for the Agency's bonds.

For more on the benefits of a Municipal Bonds Agency please see the Public Interest case at section two of the revised business case.

Investing in and Borrowing from the Agency

There are now have nearly 60 councils joining the LGA as investors in the Agency. They are of all types and sizes; from all sides of the political spectrum; and from all over the country.  After a two successful capital raises , the Agency is sufficiently well capitalised to proceed into full launch and become a fully independent entity.  

To reward those councils with the vision and ambition to invest in the establishment of the Agency; encourage further investment; and take the Agency on another step towards the stated ambition of attracting the widest shareholder base within the sector, priority for borrowing from the Agency will be given to shareholders and non-shareholders will be charged a premium to borrow.  The Company believes that it would still be cheaper however, for a non-shareholder to borrow from the Agency than, for example, from the Public Works Loans Board.  

If you have any questions about the Agency, or are interest in investing in or borrowing from it, please contact:

Aidan Brady, Chief Executive, Local Capital Finance Company

Christian Wall, Programme Manager, Local Capital Finance Company
Telephone: 0203 837 9963

John Wright, LGA contact

Telephone: 020 7664 3146

The LGA's latest press release 15 December 2014

Business case documents

Municipal Bonds Agency Summary (PDF, 4 pages, 220KB)

Municipal Bonds Agency Report (PDF, 100 pages,  2MB - large file)

Further information

Sweden's local government collective bonds agency

Finland's local government collective bonds agency:

New Zealand local government collective bonds agency

The UK Public Works Loans Board

23 February 2016

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