TABLE OF CONTENTS - Financiën en Begrotingfinancien-begroting.brussels/ra_dette_2016_en_1.pdf ·...

Annual Report 2016 of the Brussels Capital Region’s Debt Agency 2

TABLE OF CONTENTS

INTRODUCTION ....................................................................................................................................................... 5

PART 1 : REGIONAL DEBT - ESA 2010 ...................................................................................................................... 7

CHAPTER 1 : COMPOSITION OF THE REGIONAL DEBT ................................................................................. 7

CHAPTER 2 : KEY FIGURES OF THE DEBT ...................................................................................................... 9

CHAPTER 3 : INFLATION HEDGING OF REGIONAL BUDGET ....................................................................... 10

3.1. HISTORY ........................................................................................................................................... 10 3.2. OUTLOOK 2017 ................................................................................................................................. 10

PART 2 : ESA DEBT ................................................................................................................................................. 11

PART 3 : TOTAL DIRECT DEBT ................................................................................................................................ 13

3.1. MANAGEMENT REPORT ........................................................................................................................... 13

CHAPTER 1 : DECISION AND CONTROL PROCESSES ................................................................................... 13

1.1. DECISION-MAKING PROCESS (LEGAL FRAMEWORK) .................................................................................... 13 1.2. DECISION-MAKING PROCESS (FINANCIAL STRATEGY COMMISSION)............................................................... 14 1.3. CONTROL PROCESS (OOBAC) .............................................................................................................. 15 1.4. CONTROL PROCESS (COURT OF AUDITORS) .............................................................................................. 16 1.5. CONTROL PROCESS (EUROSTAT - NAI - NBB) .......................................................................................... 16

CHAPTER 2 : MACROECONOMIC CONTEXT ............................................................................................... 17

2.1. GLOBAL MACROECONOMIC ENVIRONMENT .............................................................................................. 17 2.2. MACROECONOMIC ENVIRONMENT OF THE EUROZONE ............................................................................... 19

2.2.1. FINANCIAL EVOLUTIONS .............................................................................................................. 19 2.2.2. ECONOMIC ACTIVITY ................................................................................................................... 20 2.2.3. EVOLUTION OF PRICES ................................................................................................................. 20 2.2.4. EVOLUTION OF CREDIT ................................................................................................................ 21 2.2.5. BUDGET POLICIES AND STRUCTURAL REFORMS ................................................................................. 21 2.2.6. MONETARY POLICY INSTRUMENTS ................................................................................................. 21

CHAPTER 3 : KEY FIGURES .......................................................................................................................... 23

3.1. TOTAL DIRECT DEBT OUTSTANDING (ST & LT) .......................................................................................... 23 3.2. COST OF FUNDING .............................................................................................................................. 24 3.3. PORTFOLIO DURATION(S) ..................................................................................................................... 27

3.3.1. « CLASSIC » DURATION ............................................................................................................... 27 3.3.2. DURATION OF FUNDING .............................................................................................................. 28 3.3.3. DURATION OF RATE .................................................................................................................... 28

3.4. PORTFOLIO STRUCTURE ....................................................................................................................... 29 3.5. DEBT BURDEN .................................................................................................................................... 30 3.6. MARK TO MARKET RISK ........................................................................................................................ 30 3.7. DEBT SERVICE COVERAGE RATIO ............................................................................................................ 31

CHAPTER 4 : LONG-TERM DEBT ................................................................................................................. 32

4.1. REGIONAL STRATEGIES 2016 ................................................................................................................ 32 4.1.1. SOURCES OF FUNDING 2016 ........................................................................................................ 32


4.1.2. FUNDING AND MARGINS IN 2016 ................................................................................................. 33 4.1.3. SOURCES OF FUNDING AND MARGINS BETWEEN 2009-2016 ............................................................. 33

4.2. ACTIVE DERIVATIVE PRODUCTS ON 31 DECEMBER 2016............................................................................. 34 4.3. COUNTERPARTY RISK ........................................................................................................................... 35

CHAPTER 5 : SHORT-TERM DEBT ............................................................................................................... 35

5.1. MANAGEMENT TOOLS ......................................................................................................................... 35 5.1.1. CASHIER’S CONTRACT ................................................................................................................. 36 5.1.2. MTN PROGRAM ........................................................................................................................ 36 5.1.3. SHORT TERM DEBT : COMPOSITION AND FINANCIAL COST ................................................................... 37

5.2. TREASURY BILLS (<1 YEAR) ................................................................................................................... 39

CHAPTER 6 : FINANCIAL COORDINATION CENTRE (FCCB) ......................................................................... 41

6.1. INTRODUCTION .................................................................................................................................. 41 6.1.1. HISTORY AND MISSIONS .............................................................................................................. 41 6.1.2. OUTLOOK 2016 ........................................................................................................................ 42

6.2. DESCRIPTION ..................................................................................................................................... 42 6.2.1. OPERATIONS ............................................................................................................................. 42 6.2.2. FCCB STRUCTURE ...................................................................................................................... 44 6.2.3. FINANCIAL DATA 2016 ............................................................................................................... 46

6.3. REGIONAL GAIN ................................................................................................................................. 49

3.2. PERSPECTIVES ........................................................................................................................................... 51

CHAPTER 1 : AMORTIZATION SCHEDULE ................................................................................................... 51

CHAPTER 2 : NEW FINANCING AND REFINANCING REQUIREMENTS ........................................................ 52

CHAPTER 3 : EVOLUTION OF DIRECT DEBT STRUCTURE WITH FCCB AND CONSOLIDATIONS ................... 54

CHAPTER 4 : FUTURE COST OF PORTFOLIO (2017-2021) - STRESS TEST .................................................... 55

CHAPTER 5 : REGIONAL STRATEGIES 2017 ................................................................................................ 56

PART 4 : GUARANTEED DEBT ................................................................................................................................ 57

CHAPTER 1 : MANAGEMENT OF GUARANTEES ......................................................................................... 57

CHAPTER 2 : PRESENTATION OF THE NEW SYSTEM FOR A DYNAMIC MANAGEMENT OF GUARANTEES . 57

CHAPTER 3 : RECONSTRUCTING THE REGIONAL GUARANTEES OUTSTANDING BASED ON INDIVIDUAL OPERATIONS .............................................................................................................................................. 58

CHAPTER 4 : REGIONAL GUARANTEES AMOUNTS ..................................................................................... 60

PART 5 : APPENDICES ............................................................................................................................................ 63

CHAPTER 1 : STANDARD & POOR’S PRESS RELEASE .................................................................................. 63

CHAPTER 2 : REGIONAL DEBT OUTSTANDING ........................................................................................... 67

2.1. TOTAL DIRECT DEBT (OUTSTANDING) ...................................................................................................... 67 2.2. INDIRECT DEBT (OUTSTANDING) ............................................................................................................ 69 2.3. REGIONAL DEBT STRICTO SENSU (OUTSTANDING) ...................................................................................... 70

CHAPTER 3 : DEBT OUTSTANDING UNDER ESA95 STANDARD .................................................................. 72

CHAPTER 4 : DEBT OUTSTANDING UNDER ESA2010 STANDARD .............................................................. 74

CHAPTER 5 : PORTFOLIO COST OF FUNDING HISTORY .............................................................................. 75


CHAPTER 6 : PORTFOLIO DURATION HISTORY ........................................................................................... 76

CHAPTER 7 : PORTFOLIO STRUCTURE HISTORY ......................................................................................... 77

CHAPTER 8 : PORTFOLIO AMORTIZATION SCHEDULE ............................................................................... 78

CHAPTER 9 : GUARANTEED DEBT OUTSTANDING AND DEFAULT RATIOS ................................................. 79

CHAPTER 10 : CONSOLIDATED DEBT LOANS .............................................................................................. 80

PART 6 : GLOSSARY ............................................................................................................................................... 82 1. REGIONAL CONCEPTS ............................................................................................................................. 82 2. ANALYTICAL INSTRUMENTS ...................................................................................................................... 83 3. FINANCIAL PRODUCTS ............................................................................................................................. 85

INDEX .................................................................................................................................................................... 87

CHARTS ...................................................................................................................................................... 87

TABLES ....................................................................................................................................................... 88


INTRODUCTION

The Brussels-Capital Region is one of the three Regions, with the three Communities, composing the

Belgian federal state. The Region has its own institutions since 1989. They were created by the

Special Law of 12 January 1989, under the article of the Constitution which set up the existence of

three Regions in Belgium since 1970.

The Region’s inhabitants elect every five years their regional members that make up the Regional

Council, also known as the Brussels Parliament. The Regional Council makes laws through

ordinances. The Council elects and monitors the Regional Government. It consists of a Minister-

President and four Ministers to which are added three Secretaries of State.

The main domains in which the Region exercises its powers are Urbanization, Housing, Environment,

Economy, Labour, Transportation, Public works, Energy, Local authorities and related (municipalities,

intermunicipalities, religion), Foreign relations and Science research.

Starting on 1st July 2014 (implementation of the 6th State reform), supplementary federal

competences have been totally or partially transferred to Communities, Regions or Communautary

Commissions. The most important among them being dependents’ allowances, welfare, labour

market, road safety, rent regulations, Houses of justice and mortgages’ fiscal regime1.

Between 1996 and 2006, the Brussels-Capital Region enjoyed a long-term rating of AA with a stable

outlook given by the rating agency Standard & Poor's. On 1st October 2007, the outlook improved,

from stable to positive. On 16 December 2009, the outlook went back from positive to stable due to

stagnant revenues and rising debt in the region. On 1st June 2010, the outlook changed from stable to

negative because of the excessive regional indebtedness. On 7 March 2014 Standard & Poor's

confirmed its rating of long-term reference AA given to the Region. The perspective was stable,

passing from negative. On 24 February 2017, Standard & Poor’s confirmed the Region’s long term

credit rating (AA stable)2.

This AA notation is excellent and builds, in the words of Standard & Poor's, on good budget

performance, sophisticated financial management, tight control over its related companies and easy

access to liquidity. The guaranteed debt is described as well-defined and the management thereof,

active. RBC also has a wealthy and attractive economy. His operating performance has been solid. It

demonstrates consistent capacity to control operating expenditures (in particular through the set up of

a budget monitoring committee since early 2016 and a good management of the sixth State reform).

The stable outlook reflects Standard & Poor’s expectation that over the next two years (2017-2019)

the Region will pursue its good budgetary performance.

1 "A transition period was introduced from 1 July 2014 until at least January 1, 2015. During this period, existing

regulations will continue to apply until a community or region decides to make changes or to introduce new rules. The Regions and Communities are competent, but members of the federal staff, who managed files before 1 July 2014 will continue to do so. They will no longer act on behalf of the federal government, but in the name of the relevant Communities and Regions. The files related to transferred competencies are still managed by the federal public service during the transition period. Budgets and staff will be transferred from 1 January 2015 on." Translated from http://www.belgium.be/fr/actualites/2014/news_entree_en_vigueur_de_la_6e_reforme_de_l_etat.jsp

2 The Standard & Poor’s press release is in Part 5, Chapter 1.

http://www.belgium.be/fr/actualites/2014/news_entree_en_vigueur_de_la_6e_reforme_de_l_etat.jsp


The Standard & Poor’s rating is of great importance, as it sets the conditions at which the Region

finances itself on the capital markets. Moreover, the Regions and Communities can’t have a rating

superior to that of the Federal State.


PART 1 : REGIONAL DEBT - ESA 2010

CHAPTER 1 : COMPOSITION OF THE REGIONAL DEBT

The debt structure of the Brussels-Capital Region is divided as follows:

A. The regional debt according to the ESA20103 standard includes the total direct debt of the

Region and the debt of the institutions in the ESA2010 perimeter. Eurostat determines the

institutions to be consolidated.

B. The total direct debt is the total of the cumulative net borrowing (stricto sensu direct debt)

since the creation of the Region and the debt taken over from the SIAMU (fire service and

3 The European system of regional and national accounts (ESA2010) defines a common accounting framework for the Member

States of the European Union

Regional debt (broadest scope)

A. Regional debt according to

ESA2010 standard

B. Total direct debt

C. Direct debt

(stricto sensu)

=Cumulative net borrowing

E. Floating debt (ST)

Consolidated debt

stricto sensu (LT)

D. Debt taken over (LT)

Consolidated debt (LT)

Debt of consolidated

entities

F. Indirect debtG. Guaranteed

debt

Out of ESA2010 standard

G. Guaranteed debt of non-consolidated

entities


emergency medical assistance), the Regional Agency for Cleanliness, the former Province of

Brabant and the former Brussels agglomeration. The latter’s repayment of the principal is

defined in the budget in terms of "depreciation of capital".

C. The cumulative net borrowing represents the cumulative cash deficit (debt - amortizations +

floating debt) of the Region.

D. The debt taken over has been included in the total direct debt in early 1996. The Region has

taken over the debts of SIAMU (fire service and emergency medical assistance); the Regional

agency for cleanliness, the former province of Brabant and the former Brussels agglomeration.

These have been renegotiated for a total of € 158.65 million (a part of which had already been

amortized in 1995). The debt taken over has ceased to exist on December 31, 2009. Since

then the concept of cumulative net borrowing and total direct debt merge.

E. The floating debt includes the fixed-term advances (ATF), overdrafts and the MTN program

which includes treasury bills (BT). The floating debt (short-term) and the consolidated direct

debt stricto sensu (long term) form the cumulative net borrowing.

F. The indirect debt includes loans that the Region pays on behalf of other institutions. Budget-

wise the repayment of these loans is set in terms of “re-entry”.

G. Guaranteed debt: Region allows certain institutions of the Brussels-Capital Region to contract

financial commitments (loans, commercial debts, rents, …) with regional security. Amortization

and interest expenses are borne by the institutions. The Region intervenes only in case of a

default.


CHAPTER 2 : KEY FIGURES OF THE DEBT

Table 1 : Debt statistics of the Brussels-Capital Region as of 31 December (in million € or in %)

2015 2016

Rating issued by Standard and Poor's

- Long term AA AA

- Perspective Perspective stable Outlook stable

1. ESA2010 debt (net)

Outstanding 4,532.84 € € 4,533.52

- Annual change -2.34 % +0.01 %

- Debt / total revenue 105.00 % 98.11 %

2. Total direct debt

Outstanding 2,750.38 € € 2,688.01

Annual change -6.76 % -2.27 %

Long term (%)4 97.03 % 95.56 %

Short-term (%)5 2.97 % 4.44 %

Fixed rate 98.69 % 97.87 %

Variable rate 1.31 % 2.13 %

Funding sources (long term)

- Bank loans 0 % 0 %

- Bilateral loans 0 % 0 %

- Medium Term Notes 0 % 100 %

- Schuldschein 100 % 0 %

Counterparty types (long term)

- Belgian 0 % 0 %

- Foreign 100 % 100 %

Interest paid (LT + ST) 112.36 € € 103.75

Accrued interest (long-term) 106.81 € € 103.84

Amortizations 217.00 € € 156.00

Refinancing (LT + ST) 15.00 € + 0.00 € € 50.00 + € 6.00

New financing 0.00 € € 0.00

Cost of funding 4.02 % 3.98 %

Duration (in years) 9.88 9.65

Duration of funding (in years) 8.24 7.84

Duration of interest (in years) 12.94 12.79

Coverage of debt service6 546.95 % 313.36 %

Debt burden7 2.69 % 2.33 %

3. Guaranteed debt

Outstanding 2,602.52 € € 2,707.13

Annual change +1.79 % +4.02 %

4 Outstanding long term debt on outstanding total debt.

5 Outstanding floating debt on outstanding total debt.

6 Starting in 2012, Standard & Poor's assesses the available liquidity of the Brussels-Capital Region via the debt service coverage

ratio of the following 12 months (considering only certain liquidity). 7 Ratio interest + management budget fund over expenses (accrual).


CHAPTER 3 : INFLATION HEDGING OF REGIONAL BUDGET

3.1. HISTORY

In 2010 the Debt Agency conducted a study on the sensibility of the Brussels-Capital Region‘s budget

(under the ESA standard) to inflation. It conducted this analysis by itself and met most of the financial

partners of the Region, in order to study the most suitable derivatives to cover the regional risk. The

model applied to the initial 2010 budget and was annually updated.

The sensibility of the net regional consolidated budget was estimated at € 200 million (paying

inflation). On this basis the Region decided to cover half (that is € 100 million) of the risk linked to the

sensibility of the consolidated budget over a 5-year period via an optional structure, a cap-spread

(purchase of a 2% cap and selling a cap at 4%) linked to the sale of a floor at -1%. The annual

premium amounts to 0.36%.

European inflation (HICP ex-tobacco) was flat at 0.50% in October 2016, the cap and floor were thus

not activated.

Table 2 : History of the structure “inflation”

Year Yearly premium Takings Hedging cost

2012 359,000.00 140,214.90 218,785.10

2013 359,000.00 0.00 359,000.00

2014 360,994.44 0.00 360,994.44

2015 358,002.78 0.00 358,002.78

2016 358,002.78 0.00 358,002.78

Beginning in February 2014, the limits have been modified without changing the premium. They were

moved to 1,66%/2,50% for the cap-spread structure, the floor staying at -1%.

3.2. OUTLOOK 2017

The profile of regional exposure to inflation is evolving. The last estimate, based on the initial budget

2017, points to a paying sensibility on a 400 millions € volume. This greater sensibility to inflation is

essentially due to the important rise of expenses in investments (tunnels, subway) in the regional

budget, that weighs proportionnaly more in our model than the other categories of expenses (general

goods and services, wages).


PART 2 : ESA DEBT

The ESA95 norm, in application since 2002, consolidates all the debts (excepted commercial debts,

among others) in the balances of regional institutions belonging to the public administrations sector

(s.1312) with the government’s services (the Brussels’ Regional Public Service 8). This consolidation is

purely an accounting one, its result being called “Consolidated Gross Debt” or “Maastricht Debt”.

In February 2014, during a meeting with the federal and federated institutions of Belgium, a Eurostat

delegation notified its will to consolidate all entities or activities having incurred a debt on behalf of the

public administrations sector.

On 1st September of the same year, the ESA95 norm was replaced with the ESA2010 norm that

introduces new concepts such as, and not limited to, « captive financial institutions », having had for

effect the consolidation in the S1312 sector of institutions that formerly weren’t.

Three successive « waves » of ESA consolidations were thus made by Eurostat in 2014, via its

national agent, the National Accounts Institute (NAI9).

For the Brussels-Capital Region, it meant the consolidation of additional debts from forty institutions.

The consolidated regional debt outstanding is presented in this report under the ESA 2010

methodology. Differences can nonetheless appear between these figures and those officially

published by the NAI, because of the time of recording, infra-sector compensating (debts

corresponding to assets within the same subsector) taken into account or not.

The objective of the NAI and the debt agency is one of correct representation of the regional debt, and

contacts take place several times a year to explain and correct the differences between the two series.

A financial account, which contains more detailed data than the balance accounts,

A financial account in the sense of ESA, is given by the Region to NAI each quarter. It contains more

detailed data than the balance accounts, and should thus allow a better approach of the consolidated

regional debt.

The treasuries and placements balances of the institutions to be consolidated are, in our tables,

subtracted from the gross consolidated debt. This methodology is applied by the debt agency on basis

of three elements :

the retroactive characteristic of the ESA norm. Indeed, the debts of a consolidated

institution are integrated in the NAI serie since 1995 ;

the position of Eurostat, which allows to consolidate the gross debt with the treasuries

balances included in a cash pooling contract between the institution and the public

administration ;

art. 68 of the Ordonnance du 23 février 2006 (OOBCC), which organizes the centralization

of the regional treasuries via a notional cash pooling system. In application of this article:

8 « Brussels Regional Public Service » (BRPS) replaces « Ministry of the Brussels-Capital Region » (MBCR).

9 NAI (created by Law of 21 December 1994) consists in representatives of three institutions: the DG Statistics and Economical

information, the National Bank of Belgium and the Federal planning bureau. The NAI works together with those institutions but establishes the statistics, national accounts and economical previsions under its own responsibility.


- all institutions in the S1312 sector (with the exception of the FRBRTC)

automatically enter in the scope of the regional cash pooling, through a contract

between the Region and the institution;

- an institution that is in the regional cash pooling can’t make any further

investments, and all its accounts are, barring exception, centralized in the

financial cash pooling. All treasuries and investments are thus eventually

reintegrated in the cash pooling.

Whenever the term « ESA » debt is used in the present report, it refers to the gross consolidated debt,

minus the creditor accounts and the treasury placements of the institutions to be consolidated.

Table 3 : Gross consolidated debt (« Maastricht ») and creditor balance of S1312 institutions

in thousand € 2012 2013 2014 2015 2016

1. Regional Direct debt 3,146,036 3,020,528 2,949,897 2,750,376 2,688,012

2. Other consolidated regional debts 1,755,761 1,883,579 1,926,506 2,072,277 2,207,249

3. « Maastricht » gross consolidated

debt – ESA2010 4,901,797 4,904,107 4,876,403 4,822,653 4,895,261

4. Creditor balance of institutions

within the consolidation perimeter -389,201 -370,066 -235,172 -289,808 -361,742

Total net ESA debts(3+4) 4,512,596 4,534,041 4,641,231 4,532,844 4,533,519

Table 4 : (Total debts/total income) ratio

in thousand € 2012 2013 2014 2015 2016

1. Debt totals 4,512,596 4,534,041 4,641,231 4,532,844 4,533,519

2. Income totals 3,068,578 3,468,536 3,639,133 4,316,949 4,620,926

(Total debts/total income) ratio 147.06% 130.72% 127.54% 105.00% 98.11%

This ratio lets us determine the Region capacity, in a consolidated vision, to cover its future financial

obligations (financial debts) compared to its own annual receipts.

The debt/income ratio (receipts of the Region and own receipts of the institutions) for 2016 is 98.11%.

It was 105.00% end 2015. This sharp decrease is due to the receipts (+7.04%) increasing more than

the total of debts (+0.01%).


PART 3 : TOTAL DIRECT DEBT

3.1. MANAGEMENT REPORT

CHAPTER 1 : DECISION AND CONTROL PROCESSES

1.1. DECISION-MAKING PROCESS (LEGAL FRAMEWORK)

Four legal sources define the environment in which the management of the debt must be carried out.

The special law of 16 January 1989 art.49, on the financing of the Communities and

Regions, allows Regions and Communities to raise loans under certain conditions.

By voting the budget of ways and means, the Regional Council gives the government of the

Brussels-Capital Region the capacity to raise loans and enter into any transaction, including

derivatives, the issuance of commercial paper, ...

In art.9 of the Government Order of 18 July 2000 of the Brussels-Capital Region, the

Government authorizes the Minister of Finance to raise loans, to manage debt in the short,

medium and long term, and to issue commercial paper.

In the Ministerial Order of 1 June 2004 (as amended by the Ministerial Order of 25 June

2007), the Minister of Finance delegates to the Administration of Finance the power to enter

into any short-term operation (from 1 day to 1 year), as well as derivative transactions as

part of a strategy predetermined by the Financial Strategy Commission.

The Financial Strategy Commission is composed of:

the Cabinet of Finance;

the Administration of the Region (Deputy Secretary General, the Director of Finance, the

Director of Financial Management and the Departments of Debt Management and

Treasury);

the cashier of the Region which acts as advisor for free.


1.2. DECISION-MAKING PROCESS (FINANCIAL STRATEGY COMMISSION)

The Brussels-Capital Region makes use of derivatives solely for hedging purposes. These products

are systematically matched with existing underlying loans or will match them in the near future.

Legal frame •special law

•orders

•budget

Debt Agency

•active portfolio management taking into account maturities, refinancing, repayment plan, interest rate risk, liquidity risk, cash requirements, ...

•taking into account external factors: future budget deficits, changes in the yield curve and macroeconomic outlook

•suggestions of operations on the loan portfolio

Financial Strategy

Commission

•evaluating the suggested operations by the Debt Agency in terms of cost and risks

•proposed operations to the Ministre of Finance

Ministre of Finance and

Budget•decision

Debt Agency (Front Office)

•market consultation

•putting the bids in competition

Concluding the

transaction


1.3. CONTROL PROCESS (OOBAC)

The Organic Ordinance on the provisions applicable to the Budget, Accounting and Control (OOBAC),

published in the Moniteur Belge on 23 February 2006, fixed additional normative rules to the Law of

May 16, 2003 (general provisions applicable to budget, control of subsidies and accounting of the

Communities and Regions) that the Brussels Parliament has decided to apply with regard to the

Brussels-Capital Region.

It applies to the Administration and the autonomous administrative bodies of the Brussels-Capital

Region. Its scope extends to all Budget allocations. It sets out the principles of budgeting (voting of an

annual Ordinance, good financial management, principles of economy, efficiency, effectiveness and

transparency; determination for a budget year of the nature, amount and origin of revenues and

destination of expenses as well as the resulting budgetary and financial balance).

The Ordinance points out in Chapter III Article 21 the general presentation of the budget that is

presented at the end of the year to the Brussels Parliament must contain "a financial report which

includes a report on the regional debt and cash.”

The control system includes an internal control, management control, internal audit, and an

administrative and budgetary control:

internal control is a process designed to provide reasonable assurance in particular

regarding the reliability of financial information. "Internal control is carried out by each

service (...) on the basis of written procedures." Article 77 states that: "the control of sound

financial management is a set of procedures designed to ensure that the objectives are

achieved in an economical, efficient and effective manner and that the budget was spent

only for the purposes specified and within the approved limits. It is independent of the

managing services and autonomous administrative bodies that initiated the operation it

examines.";

management control is, according to Article 78, "a set of procedures that aims to quantify

and measure the objectives and guidance notes (...).It is independent of the managing

services and autonomous administrative bodies that initiated the operation it examines and

is exercised in the manner prescribed by the Government. ";

internal audit is described in section 80 as "an independent and objective activity of

assurance and guidance, whose mission is to bring added value and improve the

functioning of the organization. The internal audit function is essentially to examine and

evaluate the operation, effectiveness and efficiency of internal control. ";

the administrative and budgetary control is provided by the Inspectors of Finance. Article 81

states that they "fulfil their mission based on documents and on-site. They have access to

all files and all records (...) and receive (...) all the information they require. The Government

can also charge the Inspectors of a mission regarding the financial and budgetary aspects

of the Administration or the autonomous administrative institutions. "


1.4. CONTROL PROCESS (COURT OF AUDITORS)

The law of May 16, 2003 abolished the prior approval of the Court of Auditors, considered as heavy

and inappropriate for the transition to an accrual accounting. In addition, the prior approval could put at

risk the Court itself which could end up contesting an operation it had approved beforehand.

The OOBAC describes the new role of the Court of Auditors in the process of auditing the accounts of

the Brussels-Capital Region. Article 84 says that "the Court of Auditors shall examine the legality and

regularity of expenditure and revenue. Regarding the latter, the Court exercises general control over

the operations relating to the establishment and recovery. (...) The Court of Auditors shall be

empowered to request any documents and information of any kind whatsoever relating to the

management of Government departments and autonomous administrative bodies under its

administrative control. It can organize an on-site control. "

Through OOBAC, the Brussels-Capital Region charges the Court of Auditors with the certification of its

accounts. The audit is based on ISSAI (International Standards of Supreme Audit Institutions)

standards that are set by the INTOSAI (International Organization of Supreme Audit Institutions).

"The general account of the Regional Entity is established by the Government and sent for certification

to the Court of Auditors (...). Certification means a reasoned and supported opinion on regularity,

sincerity and loyalty of the general account of the regional entity. The Court of Auditors shall transmit

such certification to Parliament in the annex to the general account with its observations "(Article 60).

During this certification, the data of the regional debt are controlled (verification of contracts and bank

confirmations encoded in various computer applications and comparing them to payments and

revenues with regard to debt management).

In the audit report of the Court of Auditors of 6 April 2011, as part of the certification of the general

account 200810 of Government Services, we read that "the analysis of contractual procedures for the

debt management revealed developed internal controls. In particular the procedures incorporate the

ministerial and the administrative levels throughout the phases of financial operations. All payments

that have been selected for a particular audit review belong to the category of interests on the

consolidated direct debt and on commercial paper. This examination revealed that the selected flows

were in this case properly conducted and recorded in accordance with the applicable procedures and

internal controls."11

1.5. CONTROL PROCESS (EUROSTAT - NAI - NBB)

Eurostat is the European agency for the collection of statistical data collected by the Member States.

In Belgium, the National Accounts Institute (NAI) provides Eurostat with the data.

The National Bank of Belgium (NBB) controls short-term operations made by the Treasury Department

of the Region. In addition, since 2012, the NBB asked the Debt Agency to fill twice a year a

10 The General Account of 2008 was the first account certified by the Court of Auditors for the Brussels-Capital Region.

11 In « Certification du compte général 2008 des services du gouvernement de la Région de Bruxelles-Capitale Rapport détaillé

d’audit », Court of Auditors (April 6, 2011), pp. 43 & 44.


standardized table of all debt guaranteed by the Brussels-Capital Region, the first in March with

preliminary figures, and the second in August with the final figures.

Since the beginning of 2014 Eurostat (via the NIA) demands that the Federal state and the federated

entities transmit a detailed financial account resulting from the debt and cash management, and a

financial balance of assets as well.

CHAPTER 2 : MACROECONOMIC CONTEXT 12

2.1. GLOBAL MACROECONOMIC ENVIRONMENT

The Eurozone economy in 2016 has mainly been influenced by :

a) the uneven evolution of growth at the World level

Economic recovery has continued at the World level, without reaching the GDP from before the

crisis. Emerging economies have shown a stronger growth than advanced economies.

Emerging economies have been hit by the slowing of the Chinese economy and the progressive

reduction of the effects of the economic slow down in countries exporting raw materials.

Advanced economies have indeed benefited from more favourable conditions (improvement of

the situation on the labour market and continued accommodating financing policies).

b) weakness of international trade

The global volume of imports in 2016 was 1.7 % on a yearly basis (2.1 % in 2015). Some

structural evolutions that have supported World commerce (free trade, reduction of transport

costs) haven’t done it as much as before.

c) financing conditions

In advanced economies, central banks have maintained their acommodating monetary policies,

the financing conditions have thus therein stayed favourable.

d) low global inflation

The low oil prices and the underuse of production capacity are the main factors for the

moderate inflation at the World level. In OECD countries, consumer prices indexes have

increased from 0.6 % in 2015 to 1.1 % in 2016. Inflation excluding food and energy has slightly

increased on a yearly basis (1.8% in 2016 vs. 1.7% in 2015).

Volatility of oil prices was high in 2016, although staying low. The Brent price started the year at

33 USD (end January) and closed at 55 USD at year’s end. This is due to an increase of

Demand compared to Offer (decrease in production by OPEC and other producing countries;

reducing of investments of American oil companies).

Non-energy raw materials prices have steeply risen.

12 This chapter makes use of data from the ECB 2016 Annual report.


e) growth dynamics has slowed in the big economies

In the USA, GDP growth in volume in 2016 (2.6%) has been less than in 2015 (1.6%). This

comes from improving financing of households, the decline of unemployment and Consumption.

Unemployment level is now only 4.7%. Yearly inflation has increased from 0.1% in 2015 to

2.1% in 2016. Excluding food products and energy, it stood at 2.2% in 2016, from 1.8% in 2015.

In December 2016, the Fed has raised its rates by 25 BPs, to 0.75%. Budget deficit has

increased by 2.5% in 2015, to 3.2% in 2016.

Japan has seen its GDP grow by 1.0% in volume in 2016, following accomodating monetary,

budgetary and financial policies. Unemployment rate was at 3.1%. Inflation got to -0.1% in

2016, due to appreciating of yen and the fall of raw material prices. Excluding fresh food and

energy products, it was 0.6% in 2016. Bank of Japan has continued its qualitative and

quantitative easing monetary policies to fight the pressure on falling prices and the slowing

down of its economy.

In the UK, GDP growth has decreased from 2.2% in 2015 to 2.0% in 2016. The results of the

referendum entailing the exit of the European Union has led to a strong depreciation of the

Sterling Pound. Inflation rose back (0.0% in 2015). The easing monetary policy was kept so

during all of 2016, with a policy interest rate decreased by 25 BPs in August, at 0.25% and has

extended its asset buybacks. To insure the transition to exiting the European Union, the

Government has put inplace targeted measures (housing, investing in infrastructure).

In China, GDP growth decreased from 6.9% in 2015 to 6.7% in 2016 (strong Consumption and

infrastructure expenses). Inflation has reached 2%. A sluggish foreign demand has made the

volume of exports, as well as imports, part of which is intended to be re-exported after

assembly, fall.

f) Stability of the euro exchange rate

The effective nominal exchange rate of euro vs. currencies of the main commercial partners of

the Eurozone has globally been stable. Between 2015 and 2016, the euro depreciated in

nominal effective terms vs JPY. It meanwhile appreciated against GBP.


2.2. MACROECONOMIC ENVIRONMENT OF THE EUROZONE

2.2.1. Financial evolutions

The financial evolutions of the Eurozone in 2016 were :

a) euro area money market rates declined

The money market rates continued to decrease in 2016 following the deposit facility rate

becoming negative in June 2014.

The non-standard monetary policy measures implemented by the ECB, the asset purchase

programme (APP) and the targeted long-term refinancing operations (TLTRO) have had an

additional downward pressure on the money market rates via a major injection of liquidity;

therefore making the rates more and more negative.

In march 2016, the deposit facility rate was decreased to – 0.40% and the APP has been upped

from 60 to 80 billions € on a monthly basis. This entailed a new decrease of the yield on the

monetary market (the EONIA, and EURIBOR 3 month and 6 month have become even more

negative).

b) rate decrease, on the average, on government loans

Most rates on government loans have been lower than in 2015. This is due to investors’ worries

(uncertainty in regard to perpsectives of World growth), monetary policy decisions of ECB, in

particular via the public sector purchase programme – PSPP – and the increase of the APP

amounts). The average 10 year government bond yield has dropped 30 BPs in the Eurozone.

A gap between sovereign bond yields within the euro area continued to be observed, even if

moderately.

c) stability in stock markets

The stock prices have been stable in 2016 notwithstanding important cyclic fluctuations (angst

over Chinese growth and the UK referendum). The stock market in the euro area finally

increased by 1% in a year. In the US, shares increased by 10%. In December 2016, the

American stock indexes have reached a historical peak.

d) fall of external financing costs of non-financial companies

The recourse to external funding for the non-financial companies (NFC) sharply increased

(issuance of shares and bonds, trade credits, bank loans, and Assets Purchase Programme -

APP). The cost of external funding for the NFC reached a historical low during the summer of

2016.

e) households wealth improved

The net wealth of households continued to improve (rise in housing an share prices has entailed

important added worth). The financing costs of households stayed low. Household debt

continued to decrease, but stayed at a rather high level.


2.2.2. Economic activity

The average annual growth of GDP was 1.7% in 2016 against 2.0% in 2015, essentially due to

domestic demand (public and private consumption).

a) acceleration of economic recovery

This return to growth was supported by the orientation of the ECB’s monetary policy. This

induced improved financing conditions (low interest rates and improvement in sentiment among

market players). The decline in oil prices and the improvement in the labour market also

contributed to growth.

More than the previous years, the investment of companies (mainly in transport equipment)

contributed to growth. This was reflected by an increase in their profitability, their sales and the

use of their production capacity. The construction industry presented a strong recovery due to a

rise in the Demand (due to growth in real revenues, and to favourable conditions in credits and

mortgage rates) and accommodating policies (tax incentives in some countries).

Private consumption (2,0%) has been pulled by the weak oil prices, employment growth and low

interest rates.

Commercial balance (exports minus imports) contribution to GDP growth has been sluggishin

2016. Beyond China, it is the intra-European trade (Eurozone) that contributed to exports.

The recovery has been felt in the secondary sector – excluding construction (+ 1.6%) – as well

as in the tertiary (+1.8%) and in the construction sector (+2.0%). This last sector recorded its

highest rate of growth since 2006.

b) labour markets slowly recovering

Labour markets continued to recover. Employment has slightly risen (1.2%) during the third

trimester of 2016.

The increase in employment mainly concerned the services and industry sectors (excluding

construction). Employment in the construction sector stayed stable.

Unemployment rate decreased on average from 10.9% in 2015 to 10.0 % in 2016.

2.2.3. Evolution of prices

Inflation in the Eurozone stayed close to zero in 2016. This reflects the weakened inflationary

pressures, internal as well as external.

Inflation in the Eurozone settled at 0.2 %. It was 0.0% in 2015, 0.4 % in 2014 and 1.4 % in 2013. This

is due to falling prices of raw materials (energy and food products).

Inflation excluding energy and food products oscillated between 0.7 et 1.0% (0.8% in 2015 against

0.6% in 2014). The feeble inflation is domestically generated (moderate wage growth) as well as

externally generated (decrease in raw materials prices).


2.2.4. Evolution of credit

The credit growth in the euro area stood at 4.7% in December 2016 against 2.3% in December 2015.

This increase in loan applications happened under the influence of households and non-financial

companies. This is the result of the strong decrease in bank lending rates due to the combined effects

of non-standard measures implemented by the ECB and the decrease in banks’ funding costs.

2.2.5. Budget policies and structural reforms

The general government budget deficit went from 2.1% of GDP in 2015 to 1.8% of GDP in 2016. That

improvement is due to the drop in interest rate burden and cyclical factors that compensated the

deteriorating primary balance. The primary balance partly deteriorated in 2016 due to many countries

using the budgetary consolidation windfall to adopt fiscal policy stimulus (through tax cuts in particular)

in order to sustain economic growth and employment.

The majority of euro area countries have budget deficits below 3% of GDP.

The general government debt decreased from 90.4% of GDP in 2015 to 89.4% of GDP in 2016. This

decline is mainly due to the drop in interest rates and small primary surpluses.

The pace of structural reforms to be implemented stayed as slow as former year. Without those

reforms (market for goods and services, labour market, taxation, …), the growth in GDP will not be

permanent.

2.2.6. Monetary policy instruments

In a moderate growth and inflation environment, the Eurosystem adopted the following monetary

policy measures these last few years:

targeted long term refinancing operations (TLTRO) 13;

Asset Purchase Programmes or APP (quantitative easing)14;

Negative rates on deposits (aiming at inducing more accomodating conditions in

credits).

The World’s economic and financial environment (slowing of emerging markets adn weak inflation)

deteriorated early 2016 and led the ECB to strengthen the existing measures and to take new ones.

Indeed the Council of Governors has adopted the following measures :

13 Three-year credits lent to banks by the ECB, to help those to finance themselves and thus avoid a collapse of credit

that would be of great prejudice to the economic kickstart. Reinvesting the capital reimbursement of the APP for as long as necessary. 14 « Such asset purchases fall into the category of ‘unconventional’ or ‘non-conventional’ monetary policy, since they

are distinct from changes in policy rates. They are described as ‘quantitative easing’, as they lead to an increase in the quantity of money available in the economy. Asset purchases have proven highly suited to low interest rate environments, when policy rates are approaching their lower bound and traditional monetary policy thus reaches its limits. That said, their purpose is the same : to reduce the real cost of financing in order to boost economic activity and ensure price stability, the primary objective of monetary policy in the euro area. » in https://www.nbb.be/doc/ts/publications/economicreview/2016/revecoi2016_h2.pdf?language=fr, pp.1

https://www.nbb.be/doc/ts/publications/economicreview/2016/revecoi2016_h2.pdf?language=fr


lowering of all the rates (deposit facility rate to -0.40%, main refinancing operation to 0.00%

and marginal lending facility to 0.25%) ;

Chart 1 : The minimum bid rate for the main refinancing operations

Increase of the asset purchase programme APP (« quantitative easing ») : from 60 to

80 billions on a monthly basis (to the end of March 2017 and beyond if necessary) ;

Creation of a new bonds purchase programme (« Corporate Sector Purchase

Programme » - CSPP) within the APP concerning bonds of enterprises of the non-

financial sector established in the Eurozone;

Launch of four targeted longer term refinancing operations (TLTRO II) with a rate of

one every three months. Those 4-years loans could present a negativ eyield if the

banks which borrow increase themselves the volume of credits they grant to

entreprises and households.

The ECB expects these measures to produce a double effect :

a) influencing the markets anticipations regarding inflation and growth;

b) ensuring a low refinancing rate to the states, to enterprises and households.

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

3,50%

4,00%

4,50%

5,00%

1999

-01

1999

-08

200

0-0

3

2000

-10

2001

-05

2001

-12

2002

-07

2003

-02

2003

-09

2004

-04

2004

-11

2005

-06

2006

-01

200

6-0

8

2007

-03

2007

-10

2008

-05

2008

-12

2009

-07

201

0-0

2

2010

-09

2011

-04

2011

-11

2012

-06

2013

-01

2013

-08

2014

-03

2014

-10

2015

-05

2015

-12

201

6-0

7


CHAPTER 3 : KEY FIGURES

3.1. TOTAL DIRECT DEBT OUTSTANDING (ST & LT)

The cumulative net borrowing as of 31 December 2016 amounted to € 2,688,012,306.78. It decreased

by € 62,363,359.39 (-2,27%) compared to 2015. This means that the Region has reduced its debt by

that amount in the year 201615.

Chart 2 : Total Direct Debt Outstanding 1991-2016 on 31 December (in million €)

The information given by the graph of the total direct debt outstanding remains incomplete. It only

informs the reader on the amount on 31 December of the year concerned. We can refine this data.

The evolution of the annual average outstanding provides a more realistic vision of the evolution of the

regional debt as based on 365 (or 366) observations.

15 Refer to part 5 chapter 2.1 for more information.

0

500

1.000

1.500

2.000

2.500

3.000

3.500

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Outs

tand

ing

20

16:

€ 2

.69 b

illio

n


Chart 3 : Differential between the annual average outstanding and outstanding on 31 December (in thousand €)

On 31 December 2016, the debt outstanding was € 62.36 million lower than at the end of 2015. The

average amount, that better reflects the situation, is lower by € 59.14 million than in 2015.

3.2. COST OF FUNDING16

The calculating basis of the daily cost of funding is "full costing" (Consolidated debt + floating debt +

revenue and expenditure from derivatives + FCCB effect17).

There is a parallelism between the average cost of the portfolio and the Euribor curve. The magnitude

of this correlation is weighted by outstandings of the variable and floating debts. The greater a part in

the portfolio these assets represent, the more the cost of funding of the portfolio approximates the

Euribor curve.

2016 has seen Euribor rates falling heavily on 31 December (in proportion of their maturity) and on

year’s average (in reversed proportion of their maturity).

16 History of cost of funding is in the appendix (Part 5 chapter 4).

17 The creation of the Financial Coordination Centre for the Brussels-Capital Region (FCCB) permitted to reduce the weighted

average cost of the portfolio. The debit position on the current account is indeed reduced by the creditor position of the FCCB regarding the calculation of the interest. The cost on December 31, 2016 was 3.9761% with the FCCB effect and 3.9857% without.

2.200 2.400 2.600 2.800 3.000 3.200

2013

2014

2015

2016

Outstanding on 31 december

Annual average Outstanding

Cost of fu

nd

ing 2

016:

3.9

8%


Table 5 : Evolution of the Euribor rates between 2015 and 2016

E3M E6M E12M

at 12.31.2015 -0.131 -0.040 0.060

at 12.31.2016 -0.319 -0.221 -0.082

Difference -143.51% -452.50% -236.67%

average 2015 -0.020 0.053 0.168

average 2016 -0.264 -0.165 -0.035

Difference -1228.96% -407.98% -120.55%

Chart 4 : Euribor rates 3, 6, 12 month maturities

The IRS rates have risen on yearly average in reversed proportion of their maturity.

Table 6 : IRS rates evolution between 2015 and 2016

IRS5Y IRS10Y IRS15Y IRS20Y IRS30Y

at 12.31.2015 0.326 0.998 1.396 1.564 1.606

at 12.31.2016 0.073 0.661 1.015 1.173 1.219

difference -77.73% -33.78% -27.29% -25.01% -24.10%

average 2015 0.338 0.878 1.191 1.329 1.389

average 2016 -0.008 0.508 0.853 0.989 1.028

difference -102.41% -42.12% -28.36% -25.59% -25.98%

-1,00

0,00

1,00

2,00

3,00

4,00

5,00

6,00

1/01

/200

8

1/01

/200

9

1/01

/201

0

1/01

/201

1

1/01

/201

2

1/01

/201

3

1/01

/201

4

1/01

/201

5

1/01

/201

6

3M

6M

12M


Chart 5 : IRS rates evolution between 2008 and 2015

The cost of the portfolio increased from 4.02% to 3.98% in 2016 (a decrease of 1.17%), despite a

important fall of short and long term rates, in reason of the choice by the Region for a highly defensive

risk profile for the portfolio:

the fixed-rate or hedged part of the portfolio was kept at a high level in 2016 (97.87%);

the loans in 2016 were taken with shorter durations than the previous years (9.50 years on

average)18.

The 2016 portfolio presents a rather low cost in regard to its highly defensive profile (with an almost

inexistent interest rate risk19).

18 Refer to part 3.1. chapter 4 for more information.

19 Interest rate risk is the risk associated with fluctuations in interest rates.

-1,00

0,00

1,00

2,00

3,00

4,00

5,00

6,00

1/01/2008 1/01/2009 1/01/2010 1/01/2011 1/01/2012 1/01/2013 1/01/2014 1/01/2015 1/01/2016

5Y

10Y

15Y

20Y

30Y


Chart 6 : Weighted monthly average cost of the Direct debt (2014-2016)

3.3. PORTFOLIO DURATION(S)

3.3.1. « Classic » duration20

The duration is defined as the ratio of the weighted present value of each cash flow to the present

value of all cash flows. It assesses the average risk of the portfolio on the basis of all discounted cash

flows (interest and amortization).

Flows of interest and amortization of fixed rate loans and derivatives have a high duration because

they are valued on the whole of their lives. In contrast, the flows of interest and amortization of

variable-rate loans and derivatives have a short duration because they are only valued up to their next

fixing dates. In other words, we take only into account the flows for which rates are known for certain.

The duration of the portfolio has shown various cycles, up or down. The longer the duration, the less

the rate risk becomes. Periods of increase correspond to consolidations and/or reduction of the

floating debt, and those of decrease, to loan repayments and/or increase of the floating debt.

The creation of the FCCB allowed increasing the duration of the portfolio by the cancellation of the

interest rate risk on a part of the floating debt.

The duration of the portfolio on 31 December 2016 was 9.65 years, one of the highest durations ever

reached by the Region on 31 December. It slightly decreased compared to 31 December 2015 (9.88

years). Positive effects on the duration such as the FCCB (+0.37 year) and the decrease of long term

interest rates (on December, 31) that positively impacts the present-valuation of financial flows (the fall

in interest rates does increase duration), could not completely compensate the slightly negative effects

induced by the decrease of the consolidated debt at fixed or protected rate from € 2.67 billion on 31

December 2015 to € 2.57 billion on 31 December 2016, and the increase of the outstanding at

20 History of the duration is in the appendix (part 5 chapter 5).

3,833,93 3,93

3,94

3,85 3,83

3,95

4,15 4,13

4,114,02

3,91

3,00

3,20

3,40

3,60

3,80

4,00

4,20

4,40

01 02 03 04 05 06 07 08 09 10 11 12

2014

2015

2016

Dura

tion 2

01

6: 9.6

5 y

ears


variable or floating rates (from € 81.6 million on 31 December 2015 to € 119.3 million on 31 December

2016).

To examine the performance of the debt portfolio, let’s take a closer look at two evaluation criteria,

Duration and Average cost (with FCFB effect) within the same graph.

To parallel the evolution of the duration to the cost of the portfolio allows indeed taking a critical look at

the optimization of the portfolio management (with regard to establishing the best cost / risk ratio).

Chart 7 : Evolution of duration (at end of month) and weighted monthly average cost (1998-2016)

During the last ten years, with a lower financing cost (4.13% in 2007 and 3.98% in 2016) the Region

has appreciably increased the duration of its portfolio (3.17 years in 2007 and 9.65 years in 2016),

thus reducing its risks on rates, liquidity21 and refinancing22.

3.3.2. Duration of funding

The duration of funding takes only into account the amortizations. It expresses the remaining duration

of our commitments in terms of funding. This indicator, unique to the Region, measures its liquidity

risk.

It decreased from 8.24 years at the end of 2015 to 7.84 years at the end of 2016.

3.3.3. Duration of rate

The duration of rate includes only interest flows. It expresses the remaining duration of interest flows

of loans and derivatives. This indicator, unique to the Region, measures its interest rate risk.

It decreased from 12.94 years at the end of 2015 to 12.79 years at the end of 2016.

21 Liquidity risk is the risk of not finding a funding at short, medium or long term in order to cover an existing or future deficit.

22 Refinancing risk is the risk that the region would be unable to repay loans contracted in previous years, as well as the interest

expense associated with them, because it can’t borrow the amount to be refunded.

-6,00

-4,00

-2,00

0,00

2,00

4,00

6,00

8,00

10,00

12,00

0,00

2,00

4,00

6,00

8,00

10,00

12,00

31.0

1.9

831

.07

.98

31.0

1.9

931

.07

.99

31.0

1.0

031

.07

.00

31.0

1.0

131

.07

.01

31.0

1.0

231

.07

.02

31.0

1.0

331

.07

.03

31.0

1.0

431

.07

.04

31.0

1.0

531

.07

.05

31.0

1.0

631

.07

.06

31.0

1.0

731

.07

.07

31.0

1.0

831

.07

.08

31.0

1.0

931

.07

.09

31.0

1.1

031

.07

.10

31.0

1.1

131

.07

.11

31.0

1.1

231

.07

.12

31.0

1.1

331

.07

.13

31.0

1.1

431

.07

.14

31.0

1.1

531

.07

.15

31.0

1.1

631

.07

.16

Duration at end of month (in years) Weighted monthly average cost (%)


3.4. PORTFOLIO STRUCTURE

97.87% of the portfolio's total direct debt is at fixed, protected or neutralized rates.

Table 7 : Structure of the portfolio as of 31 December 2016

in € in %

Consolidated debt fixed rate 2,482,250,000.00 92.35 %

Consolidated debt variable rate

(protected)

0.00 0.00 %

Floating debt - Protected (FCCB) 148,466,494.38 5.52 %

Fixed, protected & FCCB effect 2,630,716,494.38 97.87 %

Consolidated debt variable rate 90,000,000.00 3.22 %

Floating debt 119,262,306.78 4.43 %

Floating debt protected (FCCB) -148,466,494.38 -5.52 %

Variable rate & effect FCCB 57,295,812.40 2.13 %

TOTAL 2,688,012,306.78 100.00 %

In keeping the fixed/hedged part of its portfolio at a high level (97.87%), the Region has kept low its

risk on interest rates.

Chart 8 : Evolution of the structure of the debt on 31 December 2015 (left) and on 31 December 2016 (right)

Fixed

Hedged / Capped

FCCB

Variable

Floating

Fixed

Hedged / Capped

FCCB

Variable

Floating

Port

folio

str

uctu

re 2

01

6: 9

7.8

7%

Fix

ed a

nd p

rote

cte

d


3.5. DEBT BURDEN

The debt burden is the ratio of interests disbursed by the Region from which debt revenue was

subtracted over the total regional budget expenditure. The interests amounted to more than € 104

million for 2016. This represents 2.33% of the total expenditure of the Region.

3.6. MARK TO MARKET RISK

Starting in 2014, the market rate sensitivity is now computed by the Front Office (formerly given by

Belfius Bank), the computations are based on zero-coupon rates.

Table 8 : Evolution of the regional portfolio's sensitivity

year sensitivity (total)

2014 5,338,334.44

2015 4,861,740.54

2016 5,441,277.00

The table below shows the exposition of the direct debt (and linked swaps) to the market interest rate.

This risk is spread over different interest rate maturities (first column to the left).

From a practical point of view, the table shows the change (in euro) of the Brussels Region's financial

liabilities in case of a basis point (1bp=0.01%) change in interest rate (zero-coupon) for a specific

maturity. A positive amount means, for a decrease of 1 basis point in the reference rate, an increase

of the value of the Region's financial liabilities.

The market rate sensitivity is shown for the loans and the derivatives with non-structured rate (i.e more

than 90% of the direct debt and the linked derivatives in nominal terms), the "total" column shows the

sum of the two.

Debt

burd

en 2

016 :

2.3

3%

of exp

en

diture

s


Table 9 : Market rate (zero coupon) sensitivities at 31 December 2016

Rate

maturity

Total Loans IRS (callable

included)

6M 9,088.00 37,392.00 -28,304.00

1Y 16,747.00 3,672.00 13,075.00

2Y 39,759.00 33,728.00 6,031.00

3Y 35,226.00 7,965.00 27,261.00

4Y 70,732.00 39,741.00 30,991.00

5Y 105,734.00 92,385.00 13,349.00

6Y 158,205.00 139,635.00 18,570.00

7Y 41,593.00 29,506.00 12,087.00

8Y 78,188.00 81,934.00 -3,746.00

9Y 155,343.00 75,719.00 79,624.00

10Y 94,703.00 43,383.00 51,320.00

11Y 156,057.00 168,550.00 -12,493.00

12Y 78,566.00 70,237.00 8,329.00

15Y 962,940.00 744,815.00 218,125.00

20Y 540,192.00 255,980.00 284,212.00

25Y 725,003.00 29,472.00 695,531.00

30Y 381,584.00 -7,249.00 388,833.00

35Y 266,404.00 -42,274.00 308,678.00

40Y 1,271,952.00 -2,012.00 1,273,964.00

50Y 253,261.00 - 253,261.00

60Y - - -

Total 5,411,277.00 1,802,579.00 3,638,698.00

3.7. DEBT SERVICE COVERAGE RATIO

Since the beginning of 2012, Standard & Poor’s evaluates the available liquidity of the Brussels-

Capital Region through the debt service covering ratio for the next 12 months, taking into account only

the liquidity facilities that are certain. This ratio must exceed 120% for Standard & Poor’s to review the

level of liquidity as positive.

To diminish this risk on liquidity, the Debt Agency has pursued a strategy of consolidating the direct

debt, starting from a 49.27% ratio in June 2012 to reach 431.45% in December 2013. The Agency has

seen to keep this ratio high enough ever since.

The new regional cashier’s contract stipulates a short term credit line of € 1.5 billion beginning on

01/01/201423. The ratio should attain 313.36% at the end of 2017. This translates in a very positive

level of liquidity in the analysis grid of Standard & Poor’s.

23 Refer to part 3.1. chapter 5.11. for further information.


Table 10 : Debt service coverage ratio

31.12.2016 31.12.2017 (projection)

1. Cash available on Current account24 1,418,374,334 1,014,237,693

2. Debt service25 261,322,103 325,665,294

3. Debt service coverage ratio S&P 546.95% 313.36%

CHAPTER 4 : LONG-TERM DEBT

Those last three years, the Region has reduced its debt by € 458.1 million (2013-2016). It induced a

major decrease in the direct debt. Due to the probable positive impact on the direct debt portfolio of

the balance of public finances, the Region decided to plan a limited reconsolidation strategy since

2013. It means that amongst the loans reaching their maturity dates, only those coupled with

derivatives will be refinanced.

4.1. REGIONAL STRATEGIES 2016

4.1.1. Sources of funding 2016

The Brussels-Capital Region seeks constantly to diversify its financing channels. It was not the case in

2016 because it entered into only two funding agreements for an amount of € 50 million for the

aforementioned reasons. 100% of it was made via the MTN programme. There was no other funding

under the schuldschein format, bilateral or non-bilateral bank loans. 100% of the long-term financing

was done with foreign investors.

Chart 9 : Funding 2016 by source (left) and origin (right)

24 Regarding the annual projection, availaible amount on current account doesn’t take into account placements and funding with a maturity less than a year.

25 The Debt Service is the total amortizations and interests paid in the next 12 month.

Schuldschein

MTN

Bank

Other Bilateral

belgian

foreign


The Region seeks not only to diversify its funding formats but also to diversify the nature and origin of

its investors. There are thus public and private investors (banks, savings banks, pension funds,

insurance companies, holding companies). In addition, the Debt Agency is authorized since 2012 to

enter into financing operations through direct agreements with non-bank counterparties.

4.1.2. Funding and margins in 2016

The Region has conducted two long term consolidations for a total amount of € 50 million at an

attractive level via the MTN programme. The average duration of funding is 9.5 years.

Chart 10 : Long term funding source in 2016 (mean maturities)

The average margin on loans amounted to 5.6 basis points compared to IRS and 15 basis points

compared to OLO.

4.1.3. Sources of funding and margins between 2009-2016

The Region entered into 86 financements since 2009 for a total amount of € 2.78 billion.

The average duration of funding is 12.4 years.

The average margin on loans amounted to 94 BPs compared to IRS and 36.5 BPs compared to OLO.

0 2 4 6 8 10

Schuldschein

MTN

Bank

Other Bilateral

Mean


Chart 11 : Funding source : by amount (left) and by average duration (right)

4.2. ACTIVE DERIVATIVE PRODUCTS ON 31 DECEMBER 2016

There were two transactions in 2016 for an amount of 40 million €.

The region has as of 31 December 2016 € 1.96 billion of derivatives concluded with 11 banks.

Hereafter the breakdown by bank and by product category:

Chart 12 : Derivatives breakdown by bank (left) and by product category (right)

1090,5

1166,3

467,5

50,0

Schuldschein

MTN

Bank

Other Bilateral

0 2 4 6 8 10 12 14 16 18

Schuldschein

MTN

Bank

Other Bilateral

Mean

B01

B02

B03

B08

B09

B11

B12

B13

B15

B16

B17

B19

simple swap

swap callable

slope swap

inflation cap


4.3. COUNTERPARTY RISK

Counterparty risk results from the uncertainty of a counterparty to meet its financial obligations vis-à-

vis the Region. The Region has developed an evaluation grid for the quality of its counterparties based

on their ratings, one for its funding and another for its derivatives.

The graphs below illustrate the excellent quality of the counterparties with which the Region deals.

Chart 13 : Rating of banking counterparties by funding (left) and by derivative (right)

CHAPTER 5 : SHORT-TERM DEBT

Those last three years, the Region has reduced its debt by € 458.1 million (2013-2016). This reduction

of the debt made completely disappear the initial floating debt (the Region’s cash position is positive

throughout the year) and leads today to a particularly defensive portfolio. Due to the probable positive

impact on the direct debt portfolio of the balance of public finances, the Region hopes to gradually

replenish a floating debt and therefore benefit from his line of credit (€ 1.5 billion) while maintaining a

balanced and defensive portfolio.

5.1. MANAGEMENT TOOLS

With time, the Region has developed management tools that allowed it to minimize its risk on liquidity.

A+

A

A-

BBB+

BBB

BBB-

A+

A

A-

BBB+

BBB

BBB-


5.1.1. Cashier’s contract

Following the new European tender initiated in 2013, Belfius Bank26 was chosen as the Region’s

cashier for the period from January 1st 2014 to March 31st 201827. Belfius Bank is the Brussels-Capital

Region’s cashier since January 1st 1999.

The cashier’s missions, besides the day-to-day management of accounts, exclusively consist in the

opening of credit facilities for daily deficits and surpluses as well as the financing (existing MTN

program excepted) or investment (excepted commercial paper) operations up to a duration of 30 days

(calendar) and for commercial paper for a maximum duration of 7 days.

Until December 31 2013 the Region had a cash line of € 500 million at its disposal, with a negative

margin of 4 basis points on the monthly average rate of the 1-week maturity Euribor. Given the

increased risk on liquidity since the financial crisis of 2009, the Region had to have a more solid cash

credit line at its disposal. The Region, with this tender, has obtained for the years 2014 to 2018 a cash

credit line amounting to € 1.5 billion, triple the previous amount, this with sensational margins without

reservation commissions :

on the 500 first million €, the negative margin is 6 BP under Eonia ;

on the 500 to 750 million € slice, the margin is flat on Eonia;

on the 750 million to 1.5 billion € slice, the margin is 50 BP over Eonia.

It is clear that the line from € 750 million to € 1.5 billion won’t be used often, but it allows to appreciably

reduce the short term risk on liquidity of the Region. Besides, the Region could without any risk let its

floating debt grow to a fairly high level and thus greatly reduce the cost of its debt portfolio.

5.1.2. MTN program

In addition to the aspect of credit facilities, the Brussels-Capital Region has at its disposal lines of

fixed-term advances (more than 30 days - ATF) with various banks and it entered on April 3, 2009 in a

Medium Term Note program (MTN) for short- and long-term operations (1 day to 50 years maturity)

with a € 3 billion capacity on January 1, 2014.

Originally this MTN program included the commercial paper program (treasury bills - BT) that existed

previously for short-term (1 day to 1 year) operations only. The BT program was increased from 250 to

€ 500 million on 1 June 2005, to € 700 million as of November 1, 2008, to € 2 billion as of June 16,

2010, and finally to € 3 billion as of January 1, 2014.

On 16 June 2010, the Region has set up a new MTN program now open to competition between 4

dealer banks (BNP Fortis, Belfius, KBC and ING). Dealers "of the day" may be added for specific

operations. The program has been used for up to € 874.25 million in 2016.

The 1 January 2014 update of the MTN program is not limited to the increase in capacity from 2 to 3

billion. It consists among others in :

26 Belfius Bank was called Dexia BanK until June of 2012.

27 In the case of a change of provider for the next cashier contract, the tenderer (Belfius Bank) shall ensure the remaining deliveries from the actual cashier contract for a six months period after its end.


the possibility to get the commercial paper listed, by default on Euronext Brussels, on

demand of investors (it is a legal requirement for some investors to do business with);

the simplification and harmonization of the fees grid. The fee system is now aligned on that

of the Schuldschein contract, meaning the same margin for the dealer whatever the format.

The final choice ends up with the investor;

the revision of administrative costs of the program to lower levels;

the creation of a more flexible competition system for the bids when the Region is the one

asking for emission;

bids are in competition for treasury bills of less than a month (no more exclusivity of the

cashier).

The MTN program has been made more dynamic, competitive and flexible while being much less

onerous than before and has widened field of operations on the short term.

5.1.3. Short term debt : composition and financial cost

No treasury bills were emitted in 2016.

Chart 14 : Weighted monthly distribution (number of days in month) of the floating debt in 2016

-150.000.000

-100.000.000

-50.000.000

0

50.000.000

100.000.000

150.000.000

2016

-01

2016

-02

2016

-03

2016

-04

2016

-05

2016

-06

2016

-07

2016

-08

2016

-09

201

6-1

0

2016

-11

2016

-12

Placements

Outstanding FTA

Outstanding CP

Checking account


All the interests of the short-term debt (less than a year) actually accrued in the year 2016 amounted

to € 21,774.41.

Table 11 : Accrued financial charges in 2016 in € for the short-term debt(< 1 year)

Via short-term bank financing (<30 days)

Debit Interest on current account 50,794.27

Debit interest on Fixed-Term Advances (ATF) 0.00

Via euro deposits (> 30 days):

Debit interest on euro deposits 0.00

Transaction costs on euro deposits 0.00

Via MTN program:

Transaction costs on MTN 45,508.68

Debit interest on paper (BT) -3,952.60

Transaction costs on paper (BT) 1,831.49

Via credit interest :

Credit Interest on current account 0,00

Credit interest on paper (BT) -72,404.43

Total 21,777.41

Interests on the current account are calculated as described in part 5.1.1 of the present chapter. They

are charged for the following month.

Interests on fixed-term advances (ATF) and on euro deposits (private placements) are charged at the

redemption date. It may therefore that these interests can be put on the following financial year.

Interests on paper fall into discounted interests (€ -3,952.60) and transaction costs (€ 1,831.49). The

discounted interest is paid on the issue date. They are therefore charged the same year. Transaction

costs are paid via a monthly bill (issued by the market maker) 10 to 12 weeks after the end of the

month. Some of these are thus charged on the next accounting period.

Sometimes the Region presents a positive balance on its current account. It becomes in turn lender

either through the current account (€ 0.00) or via the purchase of paper (€ 72,404.43). The strategy

was to manage those short term investments to the best by :

diversifying investment channels (current account, …) ;

diversifying investment length (one week, one month, two month, …) ;

minimizing the counterparty risk (investment in public sector) ;

often being exempted of the 25% withholding tax (in the case of an investment in the public

sector).


5.2. TREASURY BILLS (<1 YEAR)

The paper program of the Brussels-Capital Region, which is included since April 3, 2009 in the MTN

program, is characterized by :

ongoing program

Maximum amount: € 3,000,000,000 since 1 January 2014

dematerialized

clearing: National Bank of Belgium

multiples of € 25,000 with a minimum of € 625,000 by issuing

maturities: 1 day to 1 year

tax regime: under the Royal Order of 15 December 1995

market maker: Belfius Bank

This program provides many benefits to the issuer, the Brussels-Capital Region:

originally diversification of financial short-term instruments

low-cost financing

flexibility

guaranteed liquidity

suits the needs in cash management

possible use of derivatives

The advantages are significant for investors as well:

high return, higher than treasury certificates

no withholding tax for investors in the public sector

efficient secondary market

short-term product diversification


suits their needs in cash management

rating AA

Usually, we distinguish the annual volumes of paper issued (nominal value) and the annual weighted

averages (average annual outstanding). We can’t do it this year as the Brussels-Capital Region hasn’t

emitted any treasury bill in 2016.

Chart 15 : Annual issuance volume of CP (treasury bills) at nominal value

Chart 16 : Annual average outstanding of CP (treasury bills) 2001 - 2016

0

1.000.000.000

2.000.000.000

3.000.000.000

4.000.000.000

5.000.000.000

6.000.000.000

7.000.000.000

8.000.000.000

9.000.000.000

10.000.000.000

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

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07

20

08

200

9

201

0

201

1

20

12

20

13

20

14

20

15

20

16

0

50.000.000

100.000.000

150.000.000

200.000.000

250.000.000

300.000.000

350.000.000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


CHAPTER 6 : FINANCIAL COORDINATION CENTRE (FCCB)

6.1. INTRODUCTION

6.1.1. History and missions

On 3 December 2003, the Government of the Brussels-Capital Region decided to create a Financial

coordination centre (FCCB), as well as its general principles of operations. On 19 February 2004 the

ordinance creating the FCCB was voted by the Brussels Parliament. The FCCB was to be a service of

the Ministry, and be part of the Administration of Finance and Budget.

The ordinance provided for the participation of 13 regional institutions. They have to this day all joined

the coordination centre, with the exception of the Brussels Regional Funds for the Refinancing of the

Municipalities Treasuries – but the ordinance provided only for a partial participation anyway so the

financial impact is limited.

With the ordinance of 23 February 2006 on the applicable provisions regarding budget, accounting

and control, the FCCB became a fully integrated tool of financial management for the Region. This

ordinance stipulates that every Autonomous Administrative Institution (OAA) will be, by law, integrated

in the FCCB.

Thus BRUGEL, Brussels regulator of the energy market, as well as the NPO IRISTeam joined the

FCCB on January 1st and July 1st, respectively. In 2013, two new institutions joined the FCCB : the

Brussels Parking Agency on July 1st, and the Housing Fund on October 1st. The Regional Agency for

Commerce (Atrium) has joined the FCCB on April 1st 2015 and visit.brussels on April 1st 2016.

The general principles of FCCB operations :

centralization of the participating institutions’ treasuries, via a notional cash pooling;

”just in time” financing of the institutions’ expenses, through a system automatically

transferring the funds from their transit account to their own account;

making of a consolidated treasury plan based on the individual treasury plans of the

institutions;

evaluation by the FCCB of the level of smoothing of the financial fluxes of the institutions, as

well as the quality of their treasury forecasts.;

calculation and allocation of an annual subsidy for good financial management;

respect of the autonomy of the institutions, but advice given by the FCCB regarding the

improvement of their financial management.

The creation of the FCCB generates two gains : first, through the notional cash pooling, the financial

centralization allows to gain on the intermediation margins. Second, it improves the global structure of


the regional debt portfolio, and reduces its cost postponing the need to consolidate it through long

term loans, without any risk on interest rate.

Regarding the operational aspects, the FCCB functions optimally : in coordinating de cash flows of the

institutions, centralizing the treasuries and making consolidated treasury plans with a view on the best

management of the regional floating debt.

Moreover, the internally-developed IT procedures are efficient and the cooperation with the institutions

and the regional Cashier is excellent.

The FCCB also produces quality financial reports : from monthly reports to the Minister of Finance and

Budget to quarterly activity reports for each institution (including an annual activity report) and an

annual activity report of the FCCB itself, now included in the present annual report of the Brussels

Regional Debt Agency.

6.1.2. Outlook 2016

The year 2017 began, already on 1st January, with the integration of two new institutions : the

Brussels Planning Bureau (BPB) and Brussels Prevention & Security (BPS). The integration of those

two organisms was made to happen at the same time as their entry in the SAP-Platform.

Section 99 of the Ordinance containing the general budget of the Brussels-Capital Region

expenditures for fiscal 2017 provides also for the integration of Brussels Dismantling and

beezy.brussels.

Another important project is in progress. It is the merger of the two non-profit organizations Impulse

and Atrium with Brussels Invest & Export, a former service of the Regional Public Service Brussels.

This project will be realized in 2017 through an Order establishing a new institution : the Regional

Agency for Enterprise and Trade (RAET), that will begin on January 1st of 2018. A participation

agreement will be signed with the RAET. The existing agreements with Impulse and Atrium will remain

of application until their liquidation.

6.2. DESCRIPTION

6.2.1. Operations

6.2.1.1. Notional cash pooling

Notional cash pooling is a treasury management technique allowing to optimize management of

liquidities on multiple accounts without having to actually transfer funds from one account to another.

Total debit and/or credit interests are thus calculated on basis of the global balance of this grouped

account (a fictive entity), and isn’t the sum of debit and/or credit interests calculated on each individual

account anymore.

The cash pooling further allows to gain the intermediation margins of the banks between debit and

credit interests.


To the cash pooling system implemented with the creation of the FCCB, some mechanisms are

added :

the accounts of the Region and those of the participating institutions are grouped within a

fictive account on which balance the Region pays or receives the interests. The institutions

renounce their rights to receive interests on their accounts, that are integrated in this

ensemble.

the account owned by the institution that it chose as its « main account » can’t drop below

0. To achieve this, a system of automatic transfers from the regional accounts (namely the

transit accounts which the subsidies for the institutions are transferred on) to the main

accounts is taken care of by the cashier so that the balance is kept at 0, if necessary.

Consequently an expense of an institution is blocked by the cashier if the amount (taking

into account the receipts of the day on the main account) is greater than the total balance of

transit account and main accounts).

6.2.1.2. Effects of the cash pooling on the financial management of the Region

Beyond the gain on bank intermediation margins, the cash pooling has a sensible effect on the

financial management of the Region :

impact on treasury management

Before, the subsidies were transferred on the institutions’ own accounts, in the (more of

less long) wait of the real exposure of their expenses. This method led to institutions being

forced to invest their subsidies in order to get better creditor interests (compared to a sight

account) for the duration of the wait. This placement was nevertheless at worse conditions

than those obtainable by the Region.

The Region, on its side, must finance the payment of the subsidies and thus pay debit

interests to its cashier.

Presently the subsidies stay for a maximal duration on the transit accounts of the Region,

and those see movement only at the time when the expense really occurs. The floating

debt now varies at the same pace as the effective expenses of the institutions.

impact on the regional debt

The creditor balances of the institutions form a hedge for the regional debt risk on the

variation of interest rates.

The portfolio’s structure is thus modified, which allows, at risk kept equal, to postpone the

consolidation of the floating debt through long term loans, and reduce the average cost of

the regional debt.


6.2.2. FCCB structure

Table 12 : 20 regional institutions are participating in the FCCB

Agence Bruxelloise pour l’Entreprise Impulse

Agence du Stationnement de la Région de Bruxelles-Capitale ASR

Agence Régionale du Commerce Atrium

Agence Régionale pour la Propreté ARP

Bruxelles Gaz Electricité BRUGEL

Bruxelles Prévention & Sécurité BPS

Bureau Bruxellois de la Planification BBP

Centre d'Informatique pour la Région Bruxelloise CIRB

Conseil Economique et Social CES

Fonds du Logement Fonds

Institut Bruxellois pour la Gestion de l'Environnement IBGE

Institut d'Encouragement de la Recherche Scientifique et de l'Innnovation de Bruxelles INNOVIRIS

IRISteam ASBL IRISteam

Office Régional Bruxellois de l'Emploi Actiris

Service d'Incendie et d'Aide Médicale Urgente SIAMU

Société de Développement pour la Région de Bruxelles-Capitale CityDev

Société des Transports Intercommunaux de Bruxelles STIB

Société du Logement de la Région Bruxelloise SLRB

Société Régionale du Port de Bruxelles Port

Visit.brussels Visit.brussels

Their participation can be analyzed through two characteristics :

impact on the consolidated treasury plan

Importance of the financial flows on the bank accounts allows to determine the impact of

the institution on the treasury plan of the FCCB and thus the influence of its individual

treasury plan on the management of the regional floating debt.

contribution in treasury

Comparing their financial balances allows to see their relative importance in terms of

treasury.


Chart 17 : Distribution of total movements in 2016

Chart 18 : Distribution of the average outstanding of own and transit accounts in 2016


6.2.3. Financial data 2016

A. Evolution of the global financial outstanding of the FCCB :

Table 13 : Evolution of the global financial outstanding of the FCCB

Outstanding in EUR 2013 2014 2015 2016 2017 (on 21/05)

1. Own accounts 63,274,692.46 86,275,033.88 83,338,830.15 77,440,304.77 124,828,335.09

2. – end of period 89,078,341.54 71,090,848.16 136,229,459.50 148,678,893.47 103,071,364.13

3. Transit accounts 611,978,316.70 713,367,605.60 805,595,369.22 1,071,474,554.12 1,026,157,135.21

4. – end of period 507,677,238.46 808,570,305.51 758,801,701.15 845,234,202.97 1,110,352,460.49

5. Total 675,253,009.16 799,642,639.48 888,934,199.36 1,148,914,858.90 1,150,985,470.30

6. – end of period 596,755,580.00 879,661,153.67 895,031,160.65 993,913,096.44 1,213,423,824.62

Chart 19 : Evolution of the global financial outstanding of the FCCB

The average total outstanding 2016 has increased compared to that of 2015. He went indeed from €

888,934,199.36 to € 1,148,914,858.90.

This confirms anew the trend that transit accounts are debited only at the moment of the effective

expense, the subsidies thus staying for a maximum duration in the Region financial perimeter.

The following chart illustrates the evolution of the net financing needs outstanding of the institutions for

2017, subsidies excluded. This outstanding increases regularly over the period, which facilitates the

making of valid treasury plans.


Chart 20 : Evolution of the net financing needs outstanding of institutions for 2017

B. Quality of the FCCB treasury plan

The 4-weeks treasury plans provided each week by the participating institutions are consolidated and

forecasts on the own accounts and transit accounts are established for the next 28 days. These

forecasts are fundamental to the management of the regional floating debt.

The individual and consolidated plans are evaluated with the same method : a deviation is calculated,

determined by the difference between planned net movement and real net movement, divided by the

total of debit and credit movements, and this on a daily basis.

The quality of its individual plan allows the institution to get greater subsidy for good financial

management (bonus from 5 to 25 BP on the yearly average outstanding).

The quality of its consolidated plan is an indicator of the quality of its service in regard to the

management of the floating debt by the Directorate of Treasury, and the target has been set at 15%.

The quality of the FCCB treasury plan improved sensibly in the first years of operations and the 15%

target was reached in 2007. In 2009 and 2010, the making of trustworthy plans by the institutions was

made more difficult due to “conservatory measures” on the budget. 2016 has shown a sensible

increase of the deviation (17.89%). This augmentation can be explained by exceptional events.


Chart 21 : Evolution of quality – treasury plan FCCB

Reasons for the quality of the FCCB treasury plans are many :

the deviations are analyzed and grouped by category by the FCCB. This analysis is

communicated to the institutions in the form of quarterly reports and/or during informative

meetings initiated by the FCCB or the institutions. In many cases, the advice given by the

FCCB to the institutions allows them to improve the quality of their treasury forecasts.

the proactive attitude of some institutions, which have modified their internal processes in

regard to the payment of their suppliers in order to better control the timing of their

expenses.

C. Subsidies to the institutions

The participating institutions get a subsidy for their good financial management as provided for in

bilateral contract with the FCCB. Those are based on their cash contribution, and for a smaller part on

the quality of their treasury plans.

In 2016 (budget 2017), the amount of subsidies paid to the institutions was € 1,270,395.27.


The table below shows the distribution of the subsidy.

Table 14 : Distribution of the subsidy for good financial management

Institution Smoothing

Quality Quality of forecasts

Total subsidy

Impulse € 0.00 € 0.00 € 0.00

ACTIRIS € 0.00 € 38,332.53 € 38,332.53

ARP € 0.00 € 114,037.48 € 114,037.48

ASR € 0.00 € 0.00 € 0.00

ATRIUM € 0.00 € 0.00 € 0.00

BRUGEL € 0.00 € 9,523.10 € 9,523.10

CES € 0.00 € 0.00 € 0.00

CIRB € 0.00 € 18,973.76 € 18,973.76

Fonds_Log € 0.00 € 225,327.73 € 225,327.73

IBGE € 0.00 € 37,579.33 € 37,579.33

IRISteam € 0.00 € 0.00 € 0.00

INNOVIRIS € 0.00 € 1,435.97 € 1,435.97

CityDev € 0.00 € 39,534.68 € 39,534.68

SIAMU € 0.00 € 25,550.48 € 25,550.48

SLRB € 0.00 € 0.00 € 0.00

Port € 0.00 € 49,484.88 € 49,484.88

STIB € 0.00 € 710,615.33 € 710,615.33

visit.brussels € 0.00 € 0.00 € 0.00

Total € 0.00 € 1,270,395.27 € 1,270,395.27

6.3. REGIONAL GAIN

Postponing the consolidation of the regional floating debt.

The regional debt portfolio is managed by the Brussels Regional Debt Agency, in the Brussels

Finance and budget.

The portfolio risk structure is a determining factor of the management. So the floating debt, that is the

most impacted by the variation of short term rates, must be consolidated through a long term loan if its

importance in proportion of the portfolio reach too high a level. This to fix the risk and maintain a

portfolio structure in the limits set by the Debt agency with the assent of the Minister of Finance and

Budget.

The creation of the FCCB has had a positive effect on the risk structure of the regional portfolio. The

contribution in treasury of the participating institutions does indeed neutralize the risk on interest rate

for the same amount.

Since 2005 –the first complete year of operations for the FCCB- the contribution in treasury of the

participating institutions through the cash pooling has allowed the Region to postpone (avoid)

consolidations which cumulated amounts are estimated at € 1.09 billion.


The total amount of subsidies for good financial management paid for year 2016 (budget 2017) on the

February 28th 2017 is € 1,270,395.27.

The regional « financing cost » of these subsidies, compared to the contribution in treasury of the

FCCB (€ 1,095,740,690), is 0.116%.

This contribution in treasury has thus allowed the Region to avoid consolidation of its floating debt for

a total amount of € 1.09 billion at an estimated rate of 2.016%, representing a gain of 1.900% that is €

20,814,633.59 for 2016.


3.2. PERSPECTIVES

CHAPTER 1 : AMORTIZATION SCHEDULE

The amortization schedule shows the amount of outstanding capital of the Region for each maturity.

The amortization schedule is an indicator of liquidity, refinancing and interest rate risks. If a public

entity or a company is facing difficulties in finding sources of financing or refinancing, they will face

liquidity and refinancing risk. The more important the funding and refinancing requirements will be, the

more reluctant the banks will be to grant a loan, let alone on favourable terms. This will induce an

interest rate risk and will affect the borrower by a higher cost of financing through higher bank margins

on the reference rate (Euribor, IRS, OLO).

In order to reduce these risks, the Region strives to best smooth its repayment plan. This reduces the

concentration of capital repayments and consequently improves the conditions for the financing and

refinancing of the Region.

Chart 22 : Amortization schedule of the consolidated debt (2017-2021)28

The calculation of the amortizations volatility 29 around the average is the main tool available to the

Region to reduce its liquidity, refinancing and interest rate risks. Low volatility means perfect

smoothing of the amortization schedule. This is considered by the Region a priority objective to

achieve:

28 The complete depreciation plan is to be found in the annexes (Part 5 Chapter 8).

29 The analysis of volatility allows measuring the amplitude of variation of each amortization around the amortizations’ average.

0

50.000.000

100.000.000

150.000.000

200.000.000

250.000.000

2017 2018 2019 2020 2021


the Region standard deviation over average ratio shows that the dispersion of future

amortizations is close to zero:

Year Average Expressed on Standard deviation

Standard deviation /

average

2017 20.00% 5 jaar 2.38% 11.88%

this is demonstrated by the constant slope of the curve :

Chart 23 : Cumulated amortizations of the consolidated debt (2017-2021)

CHAPTER 2 : NEW FINANCING AND REFINANCING REQUIREMENTS

In order to properly assess regional interest rate and liquidity risks, the future financing requirements

that could result from the authorized budget deficits issued by the "Public sector borrowing needs"

section of the High Council of Finance (HCF) should be integrated in the analysis.

This aforementioned Section may issue an opinion, on its own initiative or at the request of the

Federal Minister of Finance, as to whether to restrict the borrowing capacity of one or more

government levels, depending on the need:

to avoid compromising the economic and monetary union;

to avoid a structural skid in financing needs.

21,39%

42,62%

62,69%

84,13%

100,00%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2017 2018 2019 2020 2021


For the forecasts from 2017 to 202130 , the deficits authorized by the Brussels-Capital Region

Government31 amounted to € 0 for the whole period. Total financing requirements amount to €

380,000,000 taking into account the codes 832 (€ 225,000,000) and the non-budgeted investments33 (€

155,000,000). Refinancing needs for the same period amount to € 960,750,000. Financing

requirements and refinancing needs amount to € 1,340,750,000.

By integrating future authorized deficits, a standard deviation over average ratio of 29.74% is obtained

for a 5 year period. Including codes 8, the ratio increases to 9.62%.

Chart 24 : Financing and refinancing requirements (2017-2021)

30 Parliament of the Brussels Capital Region, Budget of ways and means for budget year 2017, Exposé général (A-425/1-

2016/2017), p.218 et 219.

31 The Brussels-Capital Region confirms this objective to be consistent with the stability programme (2016-2019) approved by

the Council of Ministers of the federal government on April 29th 2016. This programme Ce programme was the subject of concertation between the Communities and the Regions. 32 Budget items categorized with code 8 (Lending and stock investments) are considered by the ESA2010 as financial

transactions. They have no impact on the budget and are therefore not taken into account in the calculation of the balance of net financing of the Region. They come in addition to the net budgetary balance. 33 The Brussels Capital Region doesn’t take into account in its budgetary targets the necessary investments, and of great

expense, for the tunnels such as the Leopold II tunnel and the Tunnel of the Gate to Halle, as well as the expenses for the transformation and expansion of the subway network, that are the most important investments of the Region, and having the most impact on mobility. In Parlement de la Région de Bruxelles-Capitale, Budget des recettes et des dépenses pour l’année budgétaire 2017, Exposé général (A-425/1-2016/2017), p.219.

0

50.000.000

100.000.000

150.000.000

200.000.000

250.000.000

300.000.000

350.000.000

400.000.000

450.000.000

2017 2018 2019 2020 2021

Refinancing

News deficits (HCF norms)

News deficits (codes 8)

News deficits (non-budgetedinvestments)

Total


CHAPTER 3 : EVOLUTION OF DIRECT DEBT STRUCTURE WITH FCCB AND

CONSOLIDATIONS

Taking into account the FCCB and future consolidations (fixed rate), the fixed rate structure (fixed +

caps + FCCB) of direct debt is expected to range between 64.89 and 84.74% between 2017 and

2021. The variable rate structure (variable + floating - FCCB) should be between 15.26% and 35.11%.

We see hereafter the amounts of consolidation that should have taken place by the end of 2021:

Table 15 : Refinancing and new financing (2017 - 2021)

Year Refinancing New funding (HCF, codes 8 and

non-budgeted investments)

2017 205,500,000 200,000,000

2018 204,000,000 45,000,000

2019 192,750,000 45,000,000

2020 206,000,000 45,000,000

2021 152,500,000 45,000,000

Chart 25 : Change in the structure of the Direct debt, including the FCCB and the Fixed rate consolidations (31.12.2017 - 31.12.2021)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1/01/2017 1/01/2018 1/01/2019 1/01/2020 1/01/2021

Fixed & capped rates including FCCBwith consolidations

Variable & floating rates includingFCCB with consolidations


CHAPTER 4 : FUTURE COST OF PORTFOLIO (2017-2021) - STRESS TEST34

The Debt Agency of the Brussels-Capital Region developed an internal model of the evolution of the

cost of the regional debt portfolio over a period of five years. This model is based on the evolution of

the forward rate curve and integrates future consolidations in both fixed and variable rates. The model

focuses on five macroeconomic scenarios:

actual future rates;

economic recovery with rising inflation (higher future rates aimed at reducing inflation);

economic stagnation (lower future rates, which aims to boost economic growth);

high residual inflation with prospect of an economic slowdown (inverted curve);

economic growth without inflationary pressure (steepening of the yield curve).

On each macroeconomic scenario are applied four types of strategies of consolidation:

no consolidation;

defensive consolidations (100% fixed rate);

neutral consolidations (50% fixed and 50% variable rate);

aggressive consolidations (25% fixed and 75% variable rate).

Table 16 : Macroeconomic scenario of future real rates with defensive consolidations

Weighted average annual cost (end of month)

Year Defensive consolidations

2017 3.61%

2018 3.17%

2019 3.01%

2020 3.03%

2021 3.07%

The update was made with the rates from 10 April 2017 (steepening forward Euribor rates between

2019 and 2021, and forward IRS rates between 2018 and 2021). Note the expected decrease of the

cost of the portfolio over five years.

34 Exercise consists in simulating extreme but credible rate levels in order to study the impact on the portfolio. The aim is to measure the resilience of the portfolio to cope with such situations.


CHAPTER 5 : REGIONAL STRATEGIES 2017

The Brussels Capital Region will pursue its 2016 strategy of constituting a significant level of floating

debt (debt at less than a year maturity). Like in 2015 and 2016, the Region will proceed with minimal

long term loans, only to cover existing swaps.

Although in 2016 the Region had only refinanced € 50 million against € 156 million amorizations, the

Region will only consolidate € 45 million on € 205.5 million amortizations. The objective is to reach a €

400 million floating debt by the end of 2017, that is 13.5% of the outstanding of the Direct debt. In

2018, the Region should only consolidate € 136 million on the € 204 million amortizations. This

strategy will allow to sensibly reduce the cost of the Direct debt. It was 3.97% in 2016. It should drop

to 3.50% in 2017, all that preserving a long duration (8 years) on 31 December 2017.

As for guaranteed debt, the Region will pursue the dynamic management it put in place : counterparty

risk analysis, risk translated into fees, feeding a reserve fund aiming at covering possible future

defaults. Two reviews per year and per institution will insure a strict monitoring of the portfolio.

Meanwhile the portfolio of the guaranteed debt has been reconstituted to 98%, contract per contract,

cash flow per cash flow (interests and amortizations), company per company as well as consolidated.

This database, unique in Belgium, makes it possible to have a clear future vision on the regional risk

linked to granted guarantees. Like the Direct debt portfolio, this database allows to calculate the

Duration, Cost and Structure of the Guaranteed deb, institution per institution as well as consolidated.

In the field of its transversal missions, the Debt agency will pursue the following actions :

maintaining et updating the SFL35 calculator linked to the Sixth State Reform ;

updating of the sensibility to inflation of the consolidated regional budget 2017 that could

entail hedging operations ;

pursuing collaborating with the VGC36 on matters of advice and support in their long term

financing as per the cooperation agreement signed in 2015;

pursuing and developing the collaboration with COCOM37 as per the cooperation agreement

signed in 2016.

As for the FCCB, the integration of 5 institutions is due in 2017 : Brussels Prevention and Security (1st

January 2017), Brussels Planning Bureau (1st January 2017), Bruxelles Démontage, NEO et

beezy.brussels.

35 Special Financing Law. 36 Vlaamse Gemeenschap (Flemish Community).

37 Common Communautary Commission.


PART 4 : GUARANTEED DEBT

The guaranteed debt is made of all conditional liabilities of the Region. This debt isn’t a part of the

public debt but represents a potential debt in case of default and subsequent cash call. The

guarantees are granted by the Region on liabilities (loans, etc.) as well as assets (claims, …).

CHAPTER 1 : MANAGEMENT OF GUARANTEES

The Minister of Finance and Budget has defined implementing and consolidating of a new system for

a dynamic management of guarantees as one of its priorities for the 2014-2019 legislature, with a

reinforcement of their monitoring by the Region38. The Debt Agency (Brussels Finance and Budget)

has been assigned with the implementation thereof.

CHAPTER 2 : PRESENTATION OF THE NEW SYSTEM FOR A DYNAMIC MANAGEMENT

OF GUARANTEES

The Management of guarantees has been assigned to the Direction Front Office of the Debt Agency

(hereafter « Front Office »), created mid-2014. It has developed a dynamic system based on an

analysis procedure of the effective demand of its granting, this demand being made in the frame

defined by the prior authorization in the budget.

A harmonized methodology allows for the Front Office to establish the individual risk profile of the

demanding institution and so, being able to determine the fees – annual yield that the beneficiary will

pay to the Brussels-Capital Region, based on the guaranteed outstanding.

The obligations of the beneficiary are laid in a bilateral convention while the role of the Brussels-

Capital Region is defined guarantee contract. Those two contracts, along with the advice of the Front

Office, are sent to the Government to support the decision of granting or not.

Starting with the authorization granted by the Government, The Front Office will analyze the effective

use of the guarantee – for example, by issuing an opinion on the financing conditions obtained.

Furthermore, the Front Office will monitor the evolution of the risk profile of the beneficiary in the form

of biannual meetings and an update of the financial data necessary for an actualization of its risk

profile and possibly the level of the fees.

The fees will gradually supply a reserve funds and will be used first to make up for an effective default.

Thanks to this dynamic and anticipating management, The Front Office will be able to have a more

profound knowledge of the risks linked to the beneficiaries and to contribute to the prevention of

defaults.

38 Brussels-Capital Region, ordinary session 2014-2015, 7 November 2014, A-51/2 – 2014/2015, annexe à l’Exposé général - part 1 (point OO2.3), p.86.


The Front Office will be also able to more precisely establish the real (financial, different from

accounting) exposure of the Brussels-Capital Region to its guarantees.

This approach, pioneering in Europe, answers likewise to the European Commission’s requirements

in matters of Competition and also to the new methodology of the Standard & Poor’s rating agency on

the off-balance liabilities.

The system has aready been applied, on a bilateral basis, to several entities, such as SBGE,

Hydrobru et the Housing Fund. The process, and methodology, have been approved on 9 July 2015

by the Government in an order. A project for a specific ordinance has been elaborated and will be

shortly submitted to the Government.

CHAPTER 3 : RECONSTRUCTING THE REGIONAL GUARANTEES OUTSTANDING

BASED ON INDIVIDUAL OPERATIONS

Since the end of 2014, the Middle Office of teh Debt Agency (hereafter « Middle Office ») has begun

to gather data from beneficiaries, aiming at an exhaustive documentation regarding guarantees that

have been granted, that means for each financial operation to have at disposal :

credit convention;

guarantee contract, if not already in the credit convention ;

the financial conditions of the draw, in case of a credit line;

the amortization plan, or a schedule of the cash flows that allows to determine the not yet

amortized volume of guarantee, up to its complete amortization.

On 30 September 2015, the Middle Office could reconstitute 63 % of the total of debts guaranteed by

the Region. On 30 September 2016, it was 98 % of guaranteed debts that had been reconstituted,

operation per operation, that is € 2.55 billion. The 2% left are second rank guarantees on portfolios of

small amount operations : mortgage loans granted by social credit companies, guarantees granted by

the Gurantee Fund, eco(logical) loans. For these operations, the Middle Office will still make with

validated statements of the financial managers of these companies.

This reconstruction, operation by operation, allows the Region, for the first time, to have view on the

future evolution of the its guarantees. The graph below presents the evolution of the global

outstanding of the guarantees already granted, for the institutions with documentation at disposal on

March 1st of 2016, up to their complete amortization.


Chart 26 : Evolution of the outstanding of liabilities guaranteed by the Region

0

500.000.000

1.000.000.000

1.500.000.000

2.000.000.000

2.500.000.000

3.000.000.000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047

Institutions / instellingen


CHAPTER 4 : REGIONAL GUARANTEES AMOUNTS

The two tables below present the whole portfolio of guaranteed debts by the Brussels-Capital Region :

Table 17 : Guarantees authorized and granted in 2016

In thousand €

Institutions

Authorizations

(budget 2016)

Guarantees

granted

(government)

1. Housing Fund

1.1. Bank loans 209,000 120,000

1.2. Loans from SLRB 0 0

2. Social credit companies

2.1. Loans of individuals 3,30039 334

2.2. Bank loans 11,000 0

4. Port of Brussels 0 0

5. S.T.I.B. 0 0

6. Economic expansion 35,000 0

7. B.C.R. Guarantee Fund 0 0

8. F.R.B.R.T.C.

8.1. Mission 1 267,513 0

8.2. Mission 2 400,000 0

8.5. Mission 5 0 0

9. Brussels-Energy 28,000 0

10. B2E (subsidiary of S.R.I.B.) 0 0

11. S.B.G.E. 20,000 0

14. Aquiris 0 0

15. SFAR (SRIB) 37,000 0

17. WIELS 0 0

18. Citydev (SDRB) 13,000 0

19. SLRB

19.1. Bank loans 105,000 0

19.2. Loans from FRCE 10,000 0

20. Hydrobru 250,000 250,000

21. Bruxelles-Recyclage 8,000 0

22. Viangro 0 0

23. Bruxelles-Propreté 45,000 0

24. Eco-prêts 4,200 0

25. SA Centre de tri 25,000 0

30. Bruxelles Biogaz 3,000

34. Brussels-Dismantlement 2,000

TOTAL 1,476,013 370,000

39 No upper limit but the loans must comply with the conditions to grant the guarantee described in « arrêté du 1er février 2001

du Gouvernement de la Région de Bruxelles-Capitale relatif à l'agrément des sociétés de crédit et à l'octroi de la garantie de bonne fin de la Région quant au remboursement des crédits consentis pour la construction, l'achat, la conservation et la transformation d'habitations sociales ou assimilées ».


Table 18 : Use40, cash calls and outstandings

In thousand €

institutions Uses

2016

Cash calls Outstanding on

31.12.2016

1. Housing Fund

1.1. Bank loans 120,000 0 855,826

1.2. Loans from SLRB 0 0 0


2.1. Loans of individuals 1,782 0 9,052

2.2. Bank loans 0 0 63,537

4. Port of Brussels 0 0 20,186

5. S.T.I.B. 0 0 64,211

6. Economic expansion 0 0 0

7. B.C.R. Guarantee Fund 0 1,362 21,852

8. F.R.B.R.T.C.

8.1. Mission 1 0 0 171,702

8.2. Mission 2 0 0 593,471

8.5. Mission 5 0 0 69,206

9. Brussels-Energy 0 0 15,310

10. B2E (subsidiary of S.R.I.B.) 0 0 2,681

11. S.B.G.E. 0 0 67,239

14. Aquiris 0 0 489,891

15. Plan for the Future of Housing (SRIB) 0 0 40,486

17. WIELS 0 0 1,317

18. Citydev (SDRB) 0 0 0

19. SLRB

19.1. Bank loans 0 0 34,427

19.2. Loans from FRCE 30,000 0 0

20. Hydrobru 0 0 177,700

21. Bruxelles-Recyclage 0 0 4,372

22. Viangro 0 0 1,500

23. Bruxelles-Propreté 0 0 0

24. Eco-prêts 0 0 3,162

25. SA Centre de tri 0 0 0

30. Brussels-Biogas 0 0 0

34. Brussels-Dismantlement 0 0 0

TOTAL 151,782 1,362 2,707,130

40 These uses could be on guarantees granted in 2016 as well as in years before.


The distribution (in percent) is shown in the chart below :

Chart 27 : Distribution of the total guaranteed debt between the benefiting companies for 2016 (in %)

30,38%

20,46%19,56%

9,64%

5,89%

2,63%

11,44%

1.1. Housing Fund of the Brussels CapitalRegion (guaranteed borrowings frombanks)

14. Aquiris

8.2. FRBRTC (mission 2)

8.1. FRBRTC (missions 1 & 5)

20. Hydrobru

5. STIB

Others (<3%)


PART 5 : APPENDICES

CHAPTER 1 : STANDARD & POOR’S PRESS RELEASE

Press release

PARIS, February 24, 2017. Belgian Region of Brussels-Capital 'AA' Rating Affirmed; Outlook Remains

Stable.

Overview

- In our opinion, the Belgian Region of Brussels-Capital has very strong financial management and

exceptional liquidity.

- We are affirming our 'AA' long-term rating on Brussels-Capital.

- The stable outlook reflects our expectation that Brussels-Capital will continue to post strong

budgetary performance in 2017-2019.

Rating Action

On Feb. 24, 2017, S&P Global Ratings affirmed its 'AA' long-term issuer credit rating on Belgium's

Region of Brussels-Capital. The outlook remains stable.

Rationale

The rating on Brussels-Capital reflects our view of the very predictable and wellbalanced institutional

framework for Belgian communities and regions, and Brussels-Capital's very strong financial

management, exceptional liquidity, strong budgetary performance, and strong economy. We also

factor into our ratings our view of the region's average budgetary flexibility, moderate debt burden, and

moderate contingent liabilities. The long-term rating on Brussels-Capital is at the same level as our 'aa'

assessment of its stand-alone credit profile.

Brussels-Capital has an attractive and diversified economy, which translates into very high GDP per

capita that we estimate at about € 65,545 in 2015. Nevertheless, Brussels-Capital suffers from a

structurally high unemployment rate, well exceeding 15%.

We consider that Brussels-Capital operates within Belgium's very predictable and well-balanced

institutional framework for communities and regions, characterized by the maturity and stability of the

system, and a generally good revenue and expenditure balance. In our opinion, Belgium's sixth state

reform--including the devolving of new responsibilities to regions and communities and greater

financial autonomy to regions--demonstrates the system's predictability. Institutional discussions on

the reform started in 2007, but the budgetary effects were felt only from 2015. We think that the reform

also illustrates the ability of Belgian local and regional governments (LRGs) to influence the central

government's policy.


The Region of Brussels-Capital has shown its ability to handle the sixth-reform new responsibilities

while keeping spending under control thanks to its very strong financial management. We view

positively the region's political and managerial strength, reliable budgeting, prudent and sophisticated

debt management, very efficient and optimized liquidity management, and tight monitoring of

government-related entities (GREs) and other contingent risks, including its well-defined and active

guarantee management system. Beginning in 2016, the region put in place a new budget monitoring

committee to further strengthen its revenue and expenditure management, including closer oversight

of infra-annual budget execution.

We think that Brussels-Capital has the means to maintain its tight rein on operating expenditures, with

annual growth of about 2% (excluding the transfer of new responsibilities) in 2017-2019. Under our

base-case scenario for 2017-2019, we consequently anticipate a good consolidated operating surplus

of 10% of consolidated operating revenues in 2019, compared with 11% in 2016 (based on Brussels-

Capital actuals adjusted by S&P Global Ratings), which is in line with our former base-case figure. At

the same time, we foresee it keeping capital expenditures (capex) at about € 1.5 billion annually in

2017-2019, which is higher than our previous base case due to exceptional investments in transport

and security. Therefore, we anticipate higher deficits after capital accounts than in our previous case,

but they will remain moderate, at about 4% of total revenues on average in 2017-2019, following

limited deficits at 1.8% of total revenues on average in 2015 and 2016.

To maintain a good budgetary performance, we think that Brussels-Capital could use its average

budgetary flexibility, if needed. Its modifiable tax revenues, comprising the supplementary tax on

personal income tax and regional taxes, account for around 50% of its consolidated operating

revenues. Still, we believe that Brussels-Capital would be less willing to tap its tax leeway and more

likely to use its spending flexibility if needed, especially regarding capex, which we expect will account

for 27% of total consolidated expenditures in 2017-2019.

Thanks to its strong budgetary performance, Brussels-Capital's consolidated taxsupported debt will

likely only slightly increase to a moderate 96% of consolidated operating revenues in 2019, compared

with 91% in 2016. Brussels-Capital's taxsupported debt includes the debt of the municipality fund,

Fonds régional bruxellois de refinancement des trésoreries communales (FRBRTC), which is fully

consolidated under the European system of national and regional accounts 2010 (ESA 2010).

FRBRTC lends the majority of its debt proceeds onto self-supporting municipalities in the region. This

on-lent debt currently accounts for about 14% of Brussels-Capital's consolidated operating revenues.

We consider Brussels-Capital's contingent liabilities as moderate and mainly relating to the region's

exposure to social housing mortgage companies, such as the Fonds du Logement de la Région de

Bruxelles-Capitale, and a relatively financially weak municipal sector. In contrast with ESA 2010

treatment of social housing mortgage companies, we do not include their debt in the region's

consolidated taxsupported debt, because we view them as self-supporting. The region's financial

guarantees, mainly for social housing mortgage companies, accounted for about 27% of its

consolidated operating revenues at year-end 2016. In assessing the region's contingent liabilities, we

also factor in the financial situation of the municipal sector, which we view as having some

weaknesses. We will also continue to monitor the potential risks that could emerge from the significant

financial change faced by the public body, Commission Communautaire Commune, which saw its

budget increase to € 1.2 billion from 2015 under the sixth state reform, from € 100 million in 2014.

Lastly, although we incorporate in our contingent liabilities assessment the commercial guarantee

related to a water concession contract between Aquiris and a GRE, Société Bruxellois de Gestion de

l'Eau, we believe it currently bears limited associated risks.


Liquidity

We view Brussels-Capital's liquidity as exceptional. We consider that the region has a strong debt

coverage ratio and strong access to external liquidity.

Brussels-Capital benefits from a direct multiyear € 1.5 billion account facility and FRBRTC also holds €

175 million liquidity lines. We expect the amounts available under this account facility and the region's

cash holdings will cover far more than 120% of its consolidated debt service (including FRBRTC's

short- and long-term debt repayments) in the next 12 months. We also think that the region has strong

access to external funding via the financial markets, especially through its medium-term note program,

its Belgian commercial paper program, and its access to investors in "Schuldschein" loans.

Outlook

The stable outlook reflects our base-case expectation that Brussels-Capital will maintain strong

operating performance and post moderate deficits after capital accounts until 2019.

We might consider a negative rating action in the next 24 months if we observe a structural

deterioration in Brussels-Capital's budgetary performance. This could, for example, be due to the

region's looser monitoring of GREs that are within its consolidation scope or its unwillingness to use its

own expenditure flexibility. Under this downside scenario, we could revise downward our assessment

of Brussels-Capital's financial management.

If we lowered our ratings on Belgium (unsolicited AA/Stable/A-1+), or revised the outlook on Belgium

to negative, we would take a similar action on Brussels-Capital. This is in accordance with our

methodology for rating LRGs and their related sovereigns, under which we cap the long-term ratings

and outlooks on Belgian LRGs at the level of those on the sovereign (see "Methodology:Rating Non-

U.S. Local And Regional Governments Higher Than The Sovereign,"published Dec. 15, 2014, on

RatingsDirect). In our view, Belgium's institutional and financial framework does not enable us to rate

any Belgian LRGs above the sovereign.

Conversely, we could consider a positive rating action if we took a similar action on Belgium and if, in

line with our upside scenario, Brussels-Capital posted very strong operating surpluses, enabling it to

post surpluses after capital accounts in 2017-2019 and structurally maintain a consolidated ratio of

direct debt to the operating balance at approximately 3x.

Both our upside and downside scenarios are unlikely at this stage, however.

Key Sovereign Statistics

- Belgium 'AA/A-1+' Ratings Affirmed; Outlook Stable - January 13, 2017

Related Criteria And Research

Related Criteria

- Criteria - Governments - International Public Finance: Methodology: Rating Non-U.S. Local And

Regional Governments Higher Than The Sovereign - December 15, 2014

- Criteria - Governments - International Public Finance: Methodology For Rating Non-U.S. Local And

Regional Governments - June 30, 2014


- General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology

And Assumptions - November 19, 2013

- Criteria - Governments - International Public Finance: Methodology And Assumptions For Analyzing

The Liquidity Of Non-U.S. Local And Regional Governments And Related Entities And For Rating

Their Commercial Paper Programs - October 15, 2009

- General Criteria: Use Of CreditWatch And Outlooks - September 14, 2009

- Criteria - Governments - International Public Finance: Methodology And Assumptions: The Impact Of

PPP Projects On International Local And Regional Governments: Refined Accounting Treatment -

December 15, 2008

Related Research

- Institutional Framework Assessments For Non-U.S. Local And Regional Governments - April 21,

2016

- 2015 Annual International Public Finance Default Study And Rating Transitions - June 30, 2016

- Belgium 'AA/A-1+' Ratings Affirmed; Outlook Stable - January 13, 2017

Primary Credit Analyst : Christophe Dore, Paris (33) 1 44 20 66 65 ([email protected])

Secondary Contact : Mehdi Fadli, Paris (33) 1 44 20 67 06 ([email protected])

Additional Contact : [email protected]

mailto:[email protected]




CHAPTER 2 : REGIONAL DEBT OUTSTANDING

2.1. TOTAL DIRECT DEBT (OUTSTANDING)

Table 19 : Total Direct Debt outstanding on 31 December (in thousand €)

1990 1991 1992 1993 1994 1995

1. Direct debt stricto sensu (= cumulative net borrowing)

1.1. Long term loans --- 74,368 310,956 523,357 805,585 921,358

1.2. Short-term loans --- 51,520 60,590 -4,747 27,614 68,078

Subtotal 1 --- 125,888 371,546 518,610 833,199 989,436

2. Debt taken over

2.1. Ex-Prov. of Brabant --- --- --- --- --- ---

2.2. Agglomeration --- --- --- --- --- ---

2.3. Brussels-Cleanliness --- --- --- --- --- ---

2.4. S.I.A.M.U. --- --- --- --- --- ---

Subtotal 2 --- --- --- --- --- ---

Total --- 125,888 371,546 518,610 833,199 989,436

1996 1997 1998 1999 2000 2001


1.1. Long term loans 1,039,766 1,000,741 1,069,731 918,330 941,092 918,671

1.2. Short-term loans 78,187 127,104 37,290 161,883 249,306 263,106

Subtotal 1 1,117,953 1,127,845 1,107,021 1,080,213 1,190,397 1,181,776

2. Debt taken over

2.1. Ex-Prov. of Brabant 31,001 30,160 29,233 28,212 27,086 25,843

2.2. Agglomeration 88,428 88,428 88,428 88,428 43,807 43,807

2.3. Brussels-Cleanliness 18,266 18,266 18,266 18,266 18,266 18,266

2.4. S.I.A.M.U. 19,984 19,984 19,984 19,984 19,984 19,984

Subtotal 2 157,679 156,838 155,911 154,890 109,143 107,900

Total 1,275,632 1,284,683 1,262,932 1,235,104 1,299,541 1,289,676

2002 2003 2004 2005 2006 2007


1.1. Long term loans 977,770 1,063,505 1,136,208 1,049,446 1,125,288 1,001,341

1.2. Short-term loans 276,366 165,163 351,928 240,958 270,678 358,810

Subtotal 1 1,254,136 1,228,668 1,488,136 1,290,404 1,395,966 1,360,151

2. Debt taken over

2.1. Ex-Prov. of Brabant 24,469 22,961 9,870 8,117 6,251 4,275

2.2. Agglomeration 43,807 43,807 43,807 17,730 0 0

2.3. Brussels-Cleanliness 18,266 0 0 0 0 0

2.4. S.I.A.M.U. 19,984 0 0 0 0 0

Subtotal 2 106,526 66,768 53,677 25,847 6,251 4,275

Total 1,360,661 1,295,436 1,541,813 1,316,251 1,402,217 1,364,426


2008 2009 2010 2011 2012 2013


1.1. Long term loans 1,139,789 1,984,039 2,329,039 2,645,539 3,084,540 2,994,540

1.2. Short-term loans 592,401 202,874 240,731 291,905 61,496 25,988

Subtotal 1 1,732,190 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528

2. Debt taken over

2.1. Ex-Prov. of Brabant 2,190 0 0 0 0 0

2.2. Agglomeration 0 0 0 0 0 0

2.3. Brussels-Cleanliness 0 0 0 0 0 0

2.4. S.I.A.M.U. 0 0 0 0 0 0

Subtotal 2 2,190 0 0 0 0 0

Total 1,734,380 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528

2014 2015 2016


1.1. Long term loans 2,870,750 2,668,750 2,568,750

1.2. Short-term loans 79,147 81,626 119,262

Subtotal 1 2,949,897 2,750,376 2,688,012

2. Debt taken over

2.1. Ex-Prov. of Brabant 0 0 0

2.2. Agglomeration 0 0 0

2.3. Brussels-Cleanliness 0 0 0

2.4. S.I.A.M.U. 0 0 0

Subtotal 2 0 0 0

Total 2,949,897 2,750,376 2,688,012

Chart 28 : Total Direct Debt outstanding 1990-2016 on 31 December (in million €)

0

500

1.000

1.500

2.000

2.500

3.000

3.500

Cumulated net borrowing Cumulated taken-over debt


2.2. INDIRECT DEBT (OUTSTANDING)

Table 20 : Indirect Debt outstanding on 31 December (in thousand €)

1990 1991 1992 1993 1994 1995

1. Agglo 96,321 98,995 66,345 63,735 61,061 61,061

2. S.T.I.B. 348,079 372,631 417,222 410,690 464,547 450,090

3. Loans communal41 670,363 647,480 589,510 556,689 311,810 91,175

4. Loans F.R.B.R.T.C. --- --- --- --- 47,236 109,633

5. subsidized works42 89,300 85,644 82,301 77,944 73,493 71,354

6. S.D.R.B.43 29,873 26,960 33,788 28,554 21,430 16,120

7. Brussels-Cleanliness --- --- 18,766 17,297 16,206 17,780

8. Fire dep. --- --- 14,970 14,367 13,383 15,802

9. Economic expansion --- 2,479 2,479 2,479 2,479 ---

10. Ex-Province Brabant --- --- --- --- --- 33,398

11. C.I.B.E. 284 268 250 232 212 192

12. Housingt 306,951 247,936 209,688 163,316 143,242 70,730

Total 1,541,171 1,482,393 1,435,319 1,335,303 1,155,099 937,335

1996 1997 1998 1999 2000 2001

1. Agglo --- --- --- --- --- ---

2. S.T.I.B. 431,969 391,934 351,948 341,448 243,221 188,597

3. Loans communal 50,667 555 --- --- --- ---

4. Loans F.R.B.R.T.C. 213,488 220,367 179,772 132,568 119,866 114,604

5. subsidized works 34,187 31,688 29,080 26,366 23,267 20,461

6. S.D.R.B. 11,640 7,137 3,203 1,792 1,128 562

7. Brussels-Cleanliness --- --- --- --- --- ---

8. Fire dep. --- --- --- --- --- ---

9. Economic expansion --- --- --- --- --- ---

10. Ex-Province Brabant --- --- --- --- --- ---

11. C.I.B.E. 170 149 127 103 79 54

12. Housingt 57,555 50,247 41,763 46,038 85,255 67,686

Total 799,676 702,077 605,893 548,315 472,816 391,964

41 Starting in 1993, via the Brussels Fund for the Refinancing of the Communal Treasuries (FRBRTC).

42 Includes public works, hygiene and water.

43 Concerns the acquisition of industrial land and the Military Hospital.


Chart 29 : Evolution of the Indirect Debt on 31 December (in thousand €)

2.3. REGIONAL DEBT STRICTO SENSU (OUTSTANDING)

Table 21 : Regional Debt stricto sensu outstanding on 31 December (in thousand €)

1990 1991 1992 1993 1994 1995


Subtotal 1 --- 125,888 371,546 518,610 833,199 989,436

2. Indirect debt

Subtotal 2 1,541,171 1,482,393 1,435,319 1,335,303 1,155,099 937,335

3. Regional debt

Total 1 + 2 1,541,171 1,608,281 1,806,865 1,853,913 1,988,298 1,926,771

Including historical STIB

debt

341,448 341,448 341,448 341,448 341,448 341,448

Total debt without STIB

debt

1,199,723 1,266,833 1,465,417 1,512,465 1,646,850 1,585,323

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

1.600.000

1.800.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001


1996 1997 1998 1999 2000 2001


Subtotal 1 1,275,632 1,284,683 1,262,932 1,235,104 1,299,541 1,289,676

2. Indirect debt

Subtotal 2 799,676 702,077 605,893 548,315 472,816 391,964

3. Regional debt

Total 1 + 2 2,075,308 1,986,760 1,868,825 1,783,419 1,772,357 1,681,640

Including historical STIB

debt

341,448 341,448 341,448 341,448 243,221 188,597

Total debt without STIB

debt

1,733,860 1,645,312 1,527,377 1,441,971 1,529,136 1,493,043

Chart 30 : Regional Debt stricto sensu outstanding on 31 December (in thousand €)

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

including historical STIB Debt

excluding historical STIB debt


CHAPTER 3 : DEBT OUTSTANDING UNDER ESA95 STANDARD

Table 22 : Debt outstanding under ESA95 standard (in thousand €)

In thousand € 2002 2003 2004 2005 2006 2007

1. Regional direct debt

1.1. Direct debt stricto sensu 1,254,136 1,228,668 1,488,136 1,290,404 1,395,966 1,360,151

1.2. Direct debt taken-Over 106,526 66,769 53,677 25,848 6,251 4,275

Total direct debt 1,360,662 1,295,437 1,541,813 1,316,252 1,402,217 1,364,426

2. Other consolidated regional debts

2.1. STIB 324,047 290,264 256,823 244,921 211,244 209,524

2.2. Loans FRBRTC 139,458 163,203 185,959 205,877 221,447 239,622

2.3. Subsidized works 17,715 15,497 13,209 10,931 8,792 6,712

2.4. CIBE 27 0 0 0 0 0

2.5. Housing 48,321 0 0 0 0 0

2.6. Guarantee Fund 798 1,708 1,739 453 734 1,092

Total other debts 530,366 470,672 457,730 462,182 442,217 456,950

3. Credit balances of institutions within ESA95 scope

Total - 176,897 - 104,451 - 109,621 - 31,069 - 51,810 - 34,499

Total debt under ESA95

Total 1,714,131 1,661,658 1,889,922 1,747,365 1,792,624 1,786,877

In thousand € 2008 2009 2010 2011 2012 2013

1. Regional direct debt

1.1. Direct debt stricto sensu 1,732,190 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528

1.2. Direct debt taken-Over 2,190 0 0 0 0 0

Total direct debt 1,734,380 2,186,913 2,569,770 2,937,444 3,146,036 3,020,528

2. Other consolidated regional debts

2.1. STIB 177,739 190,244 146,594 125,770 109,373 95,205

2.2. Loans FRBRTC 256,221 251,459 235,572 248,810 231,209 204,206

2.3. Subsidized works 5,059 3,482 2,298 1,314 578 333

2.4. CIBE 0 0 0 0 0 0

2.5. Housing 0 0 0 0 0 0

2.6. Guarantee Fund 138 0 0 0 0 0

Total other debts 439,157 445,185 384,464 375,894 341,160 335,738

3. Credit balances of institutions within ESA95 scope

Total - 106,085 - 94,995 -103,656 -125,259 -145,159 -134,476

Total debt under ESA95

Total 2,067,452 2,537,103 2,850,578 3,188,079 3,342,037 3,219,796


Chart 31 : Evolution of the Regional Debt consolidated under the ESA95 norm (in thousand €)

Chart 32 : Evolution of the (Total Debt/Total receipts) ratio on 31 December under ESA95 norm

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

5.000.000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

82,41% 82,59%

72,56%

66,25% 66,63%

73,51%

99,48%103,86%

110,31% 108,91%

94,05%

126,83%

100,97%

0%

20%

40%

60%

80%

100%

120%

140%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


CHAPTER 4 : DEBT OUTSTANDING UNDER ESA2010 STANDARD

The change of methodology is effective September 2014.

Table 23 : Debt outstanding under ESA2010 standard (in thousand €)

In thousand € 2012 2013 2014 2015 2016

1. Regional Direct debt 3,146,036 3,020,528 2,949,897 2,750,376 2,688,012

2. Other consolidated regional

debts 1,755,761 1,883,579 1,926,506 2,072,277 2,207,249

3. « Maastricht » gross

consolidated debt – ESA2010 4,901,797 4,904,107 4,876,403 4,822,653 4,895,261

4. Creditor balance of institutions

within the consolidation

perimeter

-389,201 -370,066 -235,172 -289,808 -361,742

Total net ESA debts(3+4) 4,512,596 4,534,041 4,641,231 4,532,844 4,533,519

Chart 33 : Evolution of the Regional Debt consolidated under the ESA2010 norm (in thousand €)

-1.000.000

0

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

2012 2013 2014 2015 2016

3. « Maastricht » gross consolidated debt – ESA2010

4. Creditor balance ofinstitutions within theconsolidation perimeter

Total net ESA debts(3+4)


Chart 34 : Evolution of the (total debt/total receipts) ratio on 31 December

CHAPTER 5 : PORTFOLIO COST OF FUNDING HISTORY

Table 24 : Portfolio cost of funding history

Year Average annual rate Average monthly rate

Minimum Maximum

1997 5.18 % 5.06 % 5.26 %

1998 5.13 % 5.00 % 5.23 %

1999 4.70 % 4.49 % 4.93 %

2000 5.31 % 5.00 % 5.61 %

2001 5.45 % 5.30 % 5.53 %

2002 5.03 % 4.88 % 5.29 %

2003 4.57 % 4.35 % 4.76 %

2004 4.11 % 3.90 % 4.32 %

2005 3.79 % 3.60 % 3.96 %

2006 3.86 % 3.73 % 4.02 %

2007 4.13 % -1.49 % 9.63 %

2008 3.52 % -3.49 % 4.27 %

2009 3.32 % 3.11 % 3.63 %

2010 3.56 % 1.98 % 4.01 %

2011 3.44 % 1.25 % 3.91 %

2012 3.74 % 3.62 % 4.03 %

2013 3.90 % 3.82 % 3.99 %

2014 3.93 % 3.74 % 4.03 %

2015 4.02 % 3.79 % 4.27 %

2016 3.98 % 3.83 % 4.15 %

147,06%130,72%

127,54%

105,00%98,11%

0,00%

20,00%

40,00%

60,00%

80,00%

100,00%

120,00%

140,00%

160,00%

2012 2013 2014 2015 2016


Chart 35 : Average monthly financing cost (weighted by average outstanding) of the Total Direct Debt (1997-2016)

CHAPTER 6 : PORTFOLIO DURATION HISTORY

Table 25 : Portfolio duration history

Year Duration on 31 December Annual average duration Duration at end of month

Minimum Maximum

1998 4.14 3.80 3.26 4.14

1999 3.40 3.57 3.35 3.94

2000 3.29 3.31 2.84 3.56

2001 3.14 3.34 3.09 3.62

2002 3.32 3.08 2.67 3.60

2003 3.66 3.50 2.93 3.91

2004 3.61 3.41 2.84 4.18

2005 3.57 3.69 3.50 4.04

2006 5.12 5.18 4.85 5.38

2007 3.17 3.51 3.15 4.46

2008 3.05 3.23 2.87 3.58

2009 6.05 4.48 2.87 6.05

2010 7.78 8.02 6.12 9.84

2011 8.18 7.92 7.24 8.93

2012 8.96 8.19 7.48 9.02

2013 8.86 9.06 8.86 9.31

2014 9.99 9.51 8.93 10.20

2015 9.88 10.51 9.88 10.84

2016 9.65 10.19 9.65 10.48

-4,00

-2,00

0,00

2,00

4,00

6,00

8,00

10,0019

97-0

119

97-0

719

98-0

119

98-0

719

99-0

119

99-0

720

00-0

120

00-0

720

01-0

120

01

-07

2002

-01

2002

-07

2003

-01

2003

-07

200

4-0

120

04-0

720

05-0

120

05-0

720

06-0

120

06

-07

2007

-01

2007

-07

2008

-01

2008

-07

200

9-0

120

09-0

720

10-0

120

10-0

720

11-0

120

11

-07

2012

-01

2012

-07

2013

-01

2013

-07

2014

-01

2014

-07

2015

-01

2015

-07

2016

-01

2016

-07


CHAPTER 7 : PORTFOLIO STRUCTURE HISTORY

Through the use of hedging designed to protect the portfolio against a rate increase, from 1.31 to

38.74% only of the composition of the debt remained at variable rates in the strictest sense (ie

unprotected) between 1997 and 2016 (2.13% in 2016). The fixed portion of the portfolio was over the

same period from 53.57 to 95.33% (92.35% in 2016), the protected part, from 0.00 to 12.80% (0.00%

in 2016), and the offset part (FCCB), from 1.41 to 8.27% (5.52% in 2016).

Chart 36 : Portfolio structure history (on 31 December)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1997

199

819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

2009

2010

2011

2012

2013

2014

201

520

16

Variable & Floating - FCCB

FCCB

Hedged / Capped

Fixed


CHAPTER 8 : PORTFOLIO AMORTIZATION SCHEDULE

The graphs thereafter show the entire amortization plan of the consolidated debt portfolio as well as its

accumulated amortizations.

Chart 37 : Amortization schedule of the consolidated debt (2017-2044)

Chart 38 : Cumulated amortizations of the consolidated debt (2017-2044)

0

50.000.000

100.000.000

150.000.000

200.000.000

250.000.000

2017

2018

2019

2020

202

1

2022

2023

2024

2025

202

6

2027

2028

2029

2030

203

2

2033

2034

2035

2036

2038

2042

2044

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

201

7

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

204

3

2044


CHAPTER 9 : GUARANTEED DEBT OUTSTANDING AND DEFAULT RATIOS

Table 26 : Guaranteed debt outstanding on December 31 (in thousand €)

2011 2012 2013 2014 2015

1. Housing Fund

1.1. Bank loans 629,453 753,750 811,831 760,331 790,581

1.2. Loans from SLRB 0 0 0 0 0

1.3. Loans from FRCE 0 0 0 0 0


2.1. Loans of individuals 24,730 23,250 21,364 22,161 19,894

2.2. Bank loans 78,530 74,705 73,375 72,256 66,638

3. Middle Housing 23 11 9 0 0

4. Port of Brussels 22,203 22,138 21,559 21,238 20,889

5. S.T.I.B. 97,374 89,933 82,245 74,259 68,479

6. Economic expansion 0 0 0 0 0

7. B.C.R. Guarantee Fund 41,556 37,234 38,243 36,434 29,080

8. F.R.B.R.T.C.

8.1. Mission 1 222,710 205,898 187,374 178,623 179,143

8.2. Mission 2 180,420 261,810 332,369 418,736 509,098

8.5. Mission 5 26,100 25,311 52,826 74,362 71,849

9. Brussels-Energy 43,781 38,577 33,135 27,450 21,511

10. B2E (subsidiary of S.R.I.B.) 6,602 5,869 5,111 4,327 3,518

11. S.B.G.E. 69,154 66,133 62,965 59,652 56,188

12 Bruxelles-Midi 4,171 0 0 0 0

13 Holding communal 0 0 0 0 0

14. Aquiris 688,400 655,700 614,700 573,341 532,399

15. SFAR (SRIB) 9,244 19,469 31,292 29,905 33,826

16. SA Flagey 210 260 233 233 0

17. WIELS 1,500 1,463 1,425 1,385 1,344

18. Citydev (SDRB) 0 0 0 0 0

19. SLRB

19.1. Bank loans 35,941 37,772 36,835 36,071 35,268

19.2. Loans from FRCE 0 0

20. Hydrobru 30,000 74,000 164,500 158,900 153,300

21. Bruxelles-Recyclage --- 7,000 6,363 5,713 5,049

22. Viangro 1,500 1,500 1,500

23. Bruxelles-Propreté 0

24. Eco-prêts 2,967

25. SA Centre de tri 0

TOTAL 2,212,103 2,400,283 2,579,254 2,556,842 2,602,521

Default ratios 2006-2016 of the total guaranteed debt (region intervention/guaranteed outstanding)

2006 0.0872% 2012 0.0000%

2007 0.0991% 2013 0.0014%

2008 0.0068% 2014 0.0000%

2009 0.0000% 2015 0.0190%

2010 0.0000% 2016 0.0503%

2011 3.0514%


CHAPTER 10 : CONSOLIDATED DEBT LOANS

Table 27 : Consolidated debt loans

Loans in EUR

Reference Amount Type Margin (BP) Disponibility date Maturity

2011_12_07_LOAN09 15,000,000.00 IRS 5 Y 07.12.2011 04.04.2016

2011_06_01_MTN_01 25,000,000.00 Euribor 6M 80.00 01.06.2011 01.06.2016

2009*2-10 5,000,000.00 IRS 7Y 110.00 13.07.2009 13.07.2016

2009*2-11 5,000,000.00 IRS 7Y 110.00 13.07.2009 13.07.2016

2009*2-12 10,000,000.00 IRS 7Y 110.00 13.07.2009 13.07.2016

2014_07_29_LOAN01 60,000,000.00 Euribor 6M 36.00 29.07.2014 29.07.2016

2011_10_14_LOAN02 30,000,000.00 Euribor 6M 139.00 14.10.2011 14.10.2016

2011_10_14_LOAN03 6,000,000.00 Euribor 6M 139.00 14.10.2011 14.10.2016

2011*2-1 25,000,000.00 IRS 6Y 52.00 10.02.2011 10.02.2017

2011*4-2 25,000,000.00 Euribor 6M 80.00 21.03.2011 21.03.2017

2011*4-1 MTN 25,000,000.00 Euribor 6M 80.00 10.03.2011 18.04.2017

2011_06_08_MTN_01 15,000,000.00 IRS 6Y 88.00 08.06.2011 08.06.2017

2011_06_17_MTN_01 69,000,000.00 Euribor 3M 105.00 17.06.2011 17.06.2017

2011_07_06_SCHU01 25,000,000.00 IRS 6Y 87.00 06.07.2011 06.07.2017

2009*2-14 20,000,000.00 Euribor 6M 52.00 17.12.2009 17.12.2017

2009*2-15 1,500,000.00 IRS 8Y 52.00 17.12.2009 17.12.2017

2010*3-1 50,000,000.00 IRS 8Y 47.00 15.01.2010 15.01.2018

2010*3-2 38,000,000.00 IRS 8Y 46.00 15.01.2010 15.01.2018

2009*2-5 36,000,000.00 IRS 9Y 120.00 30.04.2009 30.04.2018

2012_06_26_MTN_01 5,000,000.00 IRS 6Y 128.00 26.06.2012 26.06.2018

2011_07_06_SCHU02 75,000,000.00 IRS 7Y 85.50 06.07.2011 06.07.2018

2009*2-4 92,750,000.00 IRS 10Y 120.00 31.03.2009 31.03.2019

2011*1-1 MTN 50,000,000.00 Euribor 6M 66.00 11.02.2011 18.04.2019

2011*1-2 MTN 25,000,000.00 Euribor 6M 66.00 11.02.2011 18.04.2019

2011*3-1 MTN 25,000,000.00 Euribor 6M 88.00 08.03.2011 18.04.2019

2010*3-3 12,000,000.00 IRS 10Y 52.00 15.01.2010 15.01.2020

2011_04_28_MTN_01 25,000,000.00 Euribor 6M 56.00 28.04.2011 28.04.2020

2010*1-1 50,000,000.00 Euribor 6M 36.00 23.06.2010 23.06.2020

2010*1-2 MTN 50,000,000.00 Euribor 3M 55.00 23.06.2010 23.06.2020

2010*1-3 50,000,000.00 Euribor 6M 36.00 23.06.2010 23.06.2020

2012_02_02_LOAN02 19,000,000.00 IRS 8Y 02.02.2012 15.12.2020

2011*3-2 MTN 25,000,000.00 IRS 10Y 95.00 08.03.2011 08.03.2021

2011_12_07_LOAN08 7,500,000.00 IRS 15 Y 07.12.2011 19.03.2021

2009*3-1 10,000,000.00 IRS 13Y 120.00 01.04.2009 01.04.2021

2009*3-2 20,000,000.00 IRS 13Y 120.00 01.04.2009 01.04.2021

2009*3-4 20,000,000.00 IRS 13Y 120.00 14.04.2009 14.04.2021

2012_07_20_LOAN01 25,000,000.00 Euribor 6M 190.00 20.07.2012 20.07.2021

2011_07_22_MTN_01 20,000,000.00 Euribor 6M 100.00 22.07.2011 22.07.2021

2006*1-3 25,000,000.00 Euribor 6M - 3.00 20.02.2006 20.10.2021

2012_06_26_LOAN01 50,000,000.00 IRS 10Y 180.00 26.06.2012 26.06.2022

2012_07_20_LOAN02 25,000,000.00 Euribor 6M 195.00 20.07.2012 20.07.2022


Loans in EUR

Reference Amount Type Margin (BP) Disponibility date Maturity

2009*7-1/14 150,000,000.00 IRS 13Y 75.00 21.09.2009 21.09.2022

2012_08_06_MTN_01 50,000,000.00 Euribor 3M 175.00 06.08.2012 06.01.2023

2013_03_28_MTN_02 5,000,000.00 IRS 10Y 85.00 28.03.2013 28.03.2023

2014_10_08_MTN_01 10,000,000.00 Euribor 6M 19.00 08.10.2014 08.04.2023

2009*1-4 65,000,000.00 Euribor 6M 60.00 29.07.2014 29.07.2023

2012_04_10_LOAN01 25,000,000.00 Euribor 6M 59.00 10.04.2012 26.06.2024

2014_07_06_LOAN01 31,500,000.00 Euribor 3M 60.00 07.07.2014 07.07.2024

2012_08_01_MTN_01 25,000,000.00 IRS 12Y 148.00 01.08.2012 20.12.2024

2015_02_26_SCHU01 15,000,000.00 Euribor 6M 1.80 26.02.2015 28.03.2025

2009*6-1 20,000,000.00 IRS 16Y 80.00 04.09.2009 04.09.2025

2016_09_16_MTN_01 30.000.000,00 Euribor 6M 0,50 16.09.2016 14.10.2025

2006*1-1 75,000,000.00 Euribor 6M 0.00 10.05.2006 11.05.2026

2016_06_22_MTN_01 20.000.000,00 Euribor 6M 0,00 22.06.2016 29.07.2026

2012_02_15_SCHU01 5,000,000.00 IRS 15Y 151.00 15.02.2012 15.02.2027

2011_10_14_LOAN01 75,000,000.00 Euribor 6M 59.00 14.10.2011 14.10.2027

2010*5-1 100,000,000.00 IRS 18Y 54.00 06.04.2010 06.04.2028

2013_04_08_MTN_01 30,000,000.00 IRS 15Y 85.00 08.04.2013 08.04.2028

2014_04_07_MTN_01 15,000,000.00 IRS 15Y 57.00 07.04.2014 07.04.2029

2012_12_03_SCHU01 35,500,000.00 IRS 17Y 113.00 03.12.2012 03.12.2029

2009*8-2 20,000,000.00 Euribor 6M 52.00 17.12.2009 17.12.2029

2009*8-1 132,000,000.00 IRS 20Y 70.00 21.12.2009 21.12.2029

2012_02_06_SCHU01 10,000,000.00 IRS 18Y 178.00 06.02.2012 06.02.2030

2010*6-1 75,000,000.00 IRS 20Y 55.00 07.05.2010 07.05.2030

2012_02_27_MTN01 15,000,000.00 IRS 20Y 159.00 27.02.2012 27.02.2032

2012_08_09_SCHU01 15,000,000.00 IRS 20Y 160.00 09.08.2012 09.08.2032

2012_08_09_SCHU02 1,500,000.00 IRS 20Y 160.00 09.08.2012 09.08.2032

2012_11_01_SCHU01 40,000,000.00 IRS 20Y 119.00 01.11.2012 01.11.2032

2012_11_02_SCHU01 50,000,000.00 IRS 20Y 107.00 02.11.2012 02.11.2032

2012_11_14_MTN01 10,000,000.00 IRS 20Y 116.00 14.11.2012 14.11.2032

2012_12_06_MTN01 50,000,000.00 IRS 20Y 116.00 06.12.2012 06.12.2032

2013_03_28_MTN_01 5,000,000.00 IRS 20Y 103.00 28.03.2013 28.03.2033

2014_04_07_MTN_03 5,000,000.00 IRS 20Y 69.00 07.04.2014 07.04.2034

2014_04_08_SCHU01 10,000,000.00 IRS 20Y 71.00 08.04.2014 08.04.2034

2013_06_26_SCHU01 25,000,000.00 IRS 25Y 85.00 26.06.2013 26.06.2034

2012_09_07_SCHU01 30,000,000.00 IRS 22Y 133.00 07.09.2012 07.09.2034

2011_09_08_SCHU01 30,000,000.00 IRS 23Y 119.00 08.09.2011 08.09.2034

2010*4-1 25,000,000.00 Euribor 6M 45.00 06.04.2010 06.04.2035

2012_12_10_SCHU01 10,000,000.00 IRS 23Y 118.00 10.12.2012 10.12.2035

2013_04_08_SCHU01 10,000,000.00 IRS 23Y 93.00 08.04.2013 08.04.2036

2006*1-2 75,000,000.00 Euribor 6M 0.90 10.05.2006 12.05.2036

2013_03_28_SCHU01 25,000,000.00 IRS 25Y 95.00 28.03.2013 28.03.2038

2012_11_23_SCHU01 35,000,000.00 IRS 30Y 133.00 23.11.2012 24.11.2042

2014_04_07_MTN_02 20,000,000.00 IRS 30Y 91.00 07.04.2014 07.04.2044

2014_04_07_SCHU01 21,500,000.00 IRS 30Y 84.00 07.04.2014 07.04.2044


PART 6 : GLOSSARY

1. REGIONAL CONCEPTS

Centralization of treasuries FCCB was born of a political will to centralize treasury of 12 organizations (see FCCB) in

a notional system. Centralization of cash is a technique that permits the optimization of

cash management of various accounts without having to make transfers of funds from

one account to another. Region receives / pays interest on the cumulated balance of all

accounts located in the centralization perimeter. In exchange for this centralization,

participating institutions receive a grant for sound financial management which

consists of a main amount obtained by applying a Euribor rate (minus 8 BP) on their

average total outstanding, capped to the total historical cash brought44; and an

additional amount (between 0 and 25 BP on the entire position of the institution, both

on own and transit accounts), depending on the quality of the cash flow forecasts they

provide for the Region. Ultimately, institutions will come out with an annual "return"

that the market can’t offer, unless with a greater risk.

Debt management

directorate

Debt management directorate is responsible for optimizing the management of the

regional direct debt. For this purpose, it ensures the financing needs in the short,

medium and long term for the Region. It uses all the financial products (or derivatives)

on the interest rates yield curve to minimize portfolio risk, that is to say liquidity risk

and risk of rate, as well as its cost. By its funding on the Belgian and European markets,

the Debt Agency is brought to establish and maintain close relationships with domestic

and international banking. It informs the Cabinet of Finance, the Government and the

Brussels Regional Council and the supervisory bodies such as the Inspectorate of

Finance, the Court of Auditors, the rating agency Standard & Poors of its management

and their results. It also controls the evolution of indirect debt and debt guaranteed by

the Region.

Debt taken over If the concepts of net borrowing and direct debt stricto sensu merged until 1995, it is

no longer the same since the beginning of 1996. Indeed, part of the indirect debt

(called debt taken over), that is debts of SIAMU, of Brussels-Cleanliness, of the former

province of Brabant and the former Brussels agglomeration were renegotiated and

included in the total direct debt. Starting in 2009, the concepts of net borrowing and

direct debt stricto sensu merge again. Indeed, debt taken over ceased to exist at that

date. As it is repaid, the new loans will be exclusively financed under the concept of net

borrowing.

ESA2010 The European System of National and Regional Accounts (ESA2010) defines a common

accounting framework for member countries of the European Union. It replaces the

ESA95 norm on September 1st 2014.

ESA2010 debt The ESA2010 norm consolidates all the debts in the balance (excepted commercial

debts, among others) of regional institutions belonging to the public administrations

sector (s.1312) with the government’s services (the Brussels’ Regional Public Service).

This consolidation is purely an accounting one, its result being called “Consolidated

44 The Euribor rate maturity will depend on the quality of smoothing of the cash flows of the institutions.


Gross Debt” or “Maastricht Debt”.

Financial Coordination

Centre (FCCB)

The Financial Coordination Centre for the Brussels-Capital Region was established by

ordinance of 19 February 2004 (The Government Order containing the terms of

function of the Centre and establishing a financial cash pooling for institutions of public

interest was taken on 10 June 2004). It has been operational since October 1, 2004

with 7 institutions : ABE, the ARP, the CIRB, the IBGE IRSIB the SIAMU and SLRB. CES,

ORBEM and SDRB came on 1 January 2005. The Port of Brussels STIB, on April 1, 2005.

The Ordinance of 23 February 2006 concerning the provisions applicable to the budget,

accounting and control expands the scope of FCCB to all autonomous administrative

institutions in Brussels included under sector code 13.12. Under this ordinance, Brugel -

the Brussels Energy Regulator- and the NPO IRISteam were integrated on 1 January and

1 July 2012, respectively; and the Parking Agency on 1 July 2013.

Article 101 of the budgetary ordinance of 2013 made provisions so that article 68 of

the OOBAC could be used with the Regional Housing Fund. Based on that the Housing

Fund was integrated in the FCCB system on 1 October 2013. The Regional Trade Agency

(Atrium) joined the FCCB on April 1st, 2015. In 2016, visit.brussels has also been

integrated. Lastly, on January 1st of 2017, two new institutions have been added to the

list of companies participating to the FCCB : Brussels Prevention and Security and the

Brussels planning bureau (perspective.brussels).

Guaranteed debt The guaranteed debt is made of all conditional liabilities of the Region. This debt isn’t a

part of the public debt but represents a potential debt in case of default and

subsequent cash call. The guarantees are granted by the Region on liabilities (loans,

etc.) as well as assets (claims, …).

Indirect debt Loans that the Region pays on behalf of other organizations. The repayment of these

loans is set in the budget in terms of “budget re-entry”

Total direct debt It includes the cumulated net borrowings (direct debt stricto sensu) since the creation

of the Region as well as the debt taken over. The loan repayment is defined in the

budget in terms of "depreciation of capital."

Total direct debt

(outstanding)

The total direct debt outstanding consists of the direct debt stricto sensu (floating debt,

for the short-term and consolidated direct debt stricto sensu, for the long term) and

debt taken over. The floating debt includes the fixed-term advances (ATF), treasury

bills (BT) and cash credits. The floating debt (short-term) and the consolidated direct

debt strict sense (long term) form the cumulative net borrowing. The consolidated

direct debt stricto sensu (LT) and debt taken over (LT) are the consolidated direct debt

(LT).

2. ANALYTICAL INSTRUMENTS

Amortization schedule The amortization schedule shows when all loans will be repaid (dates and amounts).

Average monthly and annual

outstanding

The outstanding is weighted by the number of days either of the month or of the year.

The main reason for the increase or decrease in the average outstanding is the

management of cash and budget flows. The increase in the average amount is due to a

negative difference between cash receipts and expenditures, the decrease, to a

positive difference.


Cost of funding The daily basis of calculation of the cost of funding is "full costing" (Consolidated debt+

floating debt + receipts and expenses of Derivatives+ FCCB effect).

Counterparty risk The counterparty risk arises from the uncertainty for a counterparty to fulfill its

financial obligations towards the Region.

Duration The duration is defined as the ratio of the weighted present value of each cash flow to

the present value of all cash flows. It assesses the average risk of the portfolio on the

basis of all discounted cash flows (interest and amortizations).

Euribor (European Interbank

Offered Rate)

The Euribor is the interbank rate applied in Europe. This is the rate at which a first-rank

bank is willing to lend funds in EUR to another first-rank bank. Rates are calculated

daily and cover maturities of less than 1 year. The Euribor replaced on 1 January 1999

the national interbank interest rates of the countries that are part of the eurozone.

Liquidity risk Liquidity risk is the risk of not finding a funding at short, medium or long term in order

to cover an existing or future deficit.

This risk translates automatically in higher margins on bank reference rate (Euribor,

IRS, OLO) required by credit institutions on consolidation loans and thus a higher cost

of financing for the borrower.

The smoothing quality of the direct debt amortization schedule reduces refinancing

concentrations and therefore the liquidity risk.

Mark to market risk Mark-to-market risk is the direct debt (and linked swaps) exposure to interest rates

risk. It is equal to the change in value (in euro) of the regional financial liabilities, in

function of a 1BP (0.01%) change in interest rate (zero-coupon) of the corresponding

maturities. A positive result points to an increase in value of the Region’s liabilities

whenever the reference rate decreases by 1BP.

Portfolio structure Portfolio Structure The structure of the portfolio consists of two parts:

- Which is not protected or subject to interest rate risk (consolidated debt at fixed rate

or at protected variable rate, floating debt whose risk is offset by the asset position of

FCCB);

- Which is subject to interest rate risk (variable rate consolidated debt and floating debt

of which the risk is not offset by the asset position of FCCB)..

Rate risk Interest rate risk is the risk associated with fluctuations in the interest curve. It defines

the level of exposure of the portfolio's total direct debt to a rate increase. Various

financial instruments are available to protect the portfolio : interest rate swaps (IRS,

forward swap, ...) FRA (forward rate agreement), interest rate options (cap, floor,

collar, ...), etc.

Refinancing risk Refinancing risk is the risk that the region would be unable to repay loans contracted in

previous years, as well as the interest expense associated with them, because it can’t

borrow the amount to be refunded.

Standard deviation /average This analysis tool gives the value of the dispersion around the mean of future

amortizations. It demonstrates the quality of smoothing of the amortization plan, and

thus the risk of liquidity.


3. FINANCIAL PRODUCTS

Cap A cap is an OTC contract between two counterparties that allows the purchaser, on

payment of a premium (as a percentage of nominal), to hedge a variable rate loan

against a rise in interest rates above a ceiling rate. This is a set of options on successive

maturities of interest rates (roll-over system).

At each fixing, the rate level is compared to the exercise price of the cap. If the rate is

higher than the exercise price, the buyer receives from the seller of cap the interest

rate differential times the nominal amount prorate temporis of the number of days in

the period. If the rate is below the strike price, the option will not be exercised.

Cap with knock-out Cap with Knock Out is a cap to which has been added a ceiling rate (= knock) with a

view to reduce the premium to pay. If the rate exceeds the maximum rate fixing, the

cap is deactivated for the fixing in question.

Collar A collar combines the purchase of a cap (premium to pay) and the sale of a floor

(premium to receive) in order to reduce (or even eliminate - this is then called "zero

cost collar ") the premium paid to purchase the cap.

Commercial paper (BT) Commercial paper represents a debt which takes the form of a title. The title is issued

on a discounted basis (reference : Euribor). It is issued by a private company or a public

entity other than a credit institution to raise capital in the short term (less than one

year duration). The Brussels-Capital Region has a commercial paper program for the

short term (1 day to 1 year) which is since 3 April 2009 included in the MTN Program.

The maximum amount of the program amounts to 3 billion € since 1 January 2014.

Consolidation Loan Consolidation Loan is the operation which consists in making a portion of the short-

term debt (<1 year) pass in long-term debt (> 1 year) either at variable or fixed rate.

Fixed term advance (ATF) Fixed advance (ATF) The fixed advance is a loan on a repayment to a fixed deadline. It is

intended to fund cash needs. The Brussels-Capital Region has lines of fixed-term

advances from 1 day to 1 year with the cashier of the Region, and for more than 30

days with various banks.

Floor A floor is an OTC contract between two counterparties that allows the buyer, by the

payment of a premium (as a percentage of nominal), to hedge against a fall in interest

rates in excess of a floor rate. This is a set of options on successive maturities of

interest rates (roll-over system).

At each fixing, the rate level is compared to the exercise of the floor price. If the rate is

lower than the exercise price, the buyer receives from the seller of the floor the rate

differential times the nominal amount prorated to the number of days in the period. If

the rate is higher than the exercise price, the option will not be exercised.

Forward interest rate swap Forward rate swap works the same way than IRS except that the IRS the starting date

of the swap is not the date the swap is contracted. The starting date of the swap is set

at a future date (forward).

FRA (Forward Rate

Agreement)

The FRA is an OTC contract (no premium to pay) between two counterparties that

guarantees, as soon as it is concluded, an interest rate on a loan or a future investment

on the money market from one month to one year maturity.

A borrower freezes the cost of its future debt by buying the FRA (protection against

rising interest rates), a lender will provide a guaranteed rate of investment by selling

FRA (protection against a rate cut).


The counterparty insures a borrowing (buyer) or lending (seller) rate known in advance

but waives the benefit of any decrease (the buyer) or increase (the seller) in rates.

The maturity of the FRA is equivalent to the starting date of the guarantee. At that

time, the value of the reference rate (Euribor) is compared to the guaranteed rate

(FRA).

IRS (Interest Rate Swap) IRS (Interest Rate Swap) An IRS is an interest rate swap. This is an operation of

exchange of interest flows, denominated in the same currency. It allows, for a specified

period, to exchange a cash flow schedule with a counterparty, this schedule

representing a debt and the other an investment (known as the two legs of the swap).

There are three variants of swap:

- variable rate to a variable rate (basis swap);

- fixed rate to variable rate (standard swap);

- variable rate to fixed rate (standard swap).

A counterparty will either be payer (the fixed rate is paid for it is borrowed and the

variable rate received because it is lent) or receiver (the variable rate is paid for it is

borrowed and the fixed rate received because it is lent).

Swaption Contraction of “swap” and “option”. The swaption is an option on a swap. It allows to

buy (call swaption) or sell (put swaption) the right (not the obligation) to enter into an

interest rate swap at a certain date (European swaption) or over a certain period

(American swaption ). The characteristics of the swap are fixed in advance (notional

amount, starting and maturity dates, reference rate).


INDEX

CHARTS

Chart 1 : The minimum bid rate for the main refinancing operations .................................................................. 22 Chart 2 : Total Direct Debt Outstanding 1991-2016 on 31 December (in million €) ............................................. 23 Chart 3 : Differential between the annual average outstanding and outstanding on 31 December (in thousand €) .............................................................................................................................................................................. 24 Chart 4 : Euribor rates 3, 6, 12 month maturities................................................................................................. 25 Chart 5 : IRS rates evolution between 2008 and 2015 .......................................................................................... 26 Chart 6 : Weighted monthly average cost of the Direct debt (2014-2016) ........................................................... 27 Chart 7 : Evolution of duration (at end of month) and weighted monthly average cost (1998-2016) .................. 28 Chart 8 : Evolution of the structure of the debt on 31 December 2015 (left) and on 31 December 2016 (right) .. 29 Chart 9 : Funding 2016 by source (left) and origin (right) ..................................................................................... 32 Chart 10 : Long term funding source in 2016 (mean maturities) .......................................................................... 33 Chart 11 : Funding source : by amount (left) and by average duration (right) ..................................................... 34 Chart 12 : Derivatives breakdown by bank (left) and by product category (right)................................................ 34 Chart 13 : Rating of banking counterparties by funding (left) and by derivative (right) ....................................... 35 Chart 14 : Weighted monthly distribution (number of days in month) of the floating debt in 2016 .................... 37 Chart 15 : Annual issuance volume of CP (treasury bills) at nominal value .......................................................... 40 Chart 16 : Annual average outstanding of CP (treasury bills) 2001 - 2016 ........................................................... 40 Chart 17 : Distribution of total movements in 2016 .............................................................................................. 45 Chart 18 : Distribution of the average outstanding of own and transit accounts in 2016 .................................... 45 Chart 19 : Evolution of the global financial outstanding of the FCCB ................................................................... 46 Chart 20 : Evolution of the net financing needs outstanding of institutions for 2017 .......................................... 47 Chart 21 : Evolution of quality – treasury plan FCCB ............................................................................................. 48 Chart 22 : Amortization schedule of the consolidated debt (2017-2021) ............................................................. 51 Chart 23 : Cumulated amortizations of the consolidated debt (2017-2021)......................................................... 52 Chart 24 : Financing and refinancing requirements (2017-2021) ......................................................................... 53 Chart 25 : Change in the structure of the Direct debt, including the FCCB and the Fixed rate consolidations (31.12.2017 - 31.12.2021) ..................................................................................................................................... 54 Chart 26 : Evolution of the outstanding of liabilities guaranteed by the Region .................................................. 59 Chart 27 : Distribution of the total guaranteed debt between the benefiting companies for 2016 (in %) ........... 62 Chart 28 : Total Direct Debt outstanding 1990-2016 on 31 December (in million €) ............................................ 68 Chart 29 : Evolution of the Indirect Debt on 31 December (in thousand €) .......................................................... 70 Chart 30 : Regional Debt stricto sensu outstanding on 31 December (in thousand €).......................................... 71 Chart 31 : Evolution of the Regional Debt consolidated under the ESA95 norm (in thousand €).......................... 73 Chart 32 : Evolution of the (Total Debt/Total receipts) ratio on 31 December under ESA95 norm ....................... 73 Chart 33 : Evolution of the Regional Debt consolidated under the ESA2010 norm (in thousand €)...................... 74 Chart 34 : Evolution of the (total debt/total receipts) ratio on 31 December ....................................................... 75 Chart 35 : Average monthly financing cost (weighted by average outstanding) of the Total Direct Debt (1997-2016) ..................................................................................................................................................................... 76 Chart 36 : Portfolio structure history (on 31 December) ....................................................................................... 77 Chart 37 : Amortization schedule of the consolidated debt (2017-2044) ............................................................. 78 Chart 38 : Cumulated amortizations of the consolidated debt (2017-2044)......................................................... 78


TABLES

Table 1 : Debt statistics of the Brussels-Capital Region as of 31 December (in million € or in %) ........................... 9 Table 2 : History of the structure “inflation” ......................................................................................................... 10 Table 3 : Gross consolidated debt (« Maastricht ») and creditor balance of S1312 institutions .......................... 12 Table 4 : (Total debts/total income) ratio ............................................................................................................. 12 Table 5 : Evolution of the Euribor rates between 2015 and 2016 ......................................................................... 25 Table 6 : IRS rates evolution between 2015 and 2016 .......................................................................................... 25 Table 7 : Structure of the portfolio as of 31 December 2016 ................................................................................ 29 Table 8 : Evolution of the regional portfolio's sensitivity ...................................................................................... 30 Table 9 : Market rate (zero coupon) sensitivities at 31 December 2016 ............................................................... 31 Table 10 : Debt service coverage ratio .................................................................................................................. 32 Table 11 : Accrued financial charges in 2016 in € for the short-term debt(< 1 year) ............................................ 38 Table 12 : 20 regional institutions are participating in the FCCB .......................................................................... 44 Table 13 : Evolution of the global financial outstanding of the FCCB ................................................................... 46 Table 14 : Distribution of the subsidy for good financial management ................................................................ 49 Table 15 : Refinancing and new financing (2017 - 2021) ...................................................................................... 54 Table 16 : Macroeconomic scenario of future real rates with defensive consolidations ...................................... 55 Table 17 : Guarantees authorized and granted in 2016 ....................................................................................... 60 Table 18 : Use, cash calls and outstandings .......................................................................................................... 61 Table 19 : Total Direct Debt outstanding on 31 December (in thousand €) .......................................................... 67 Table 20 : Indirect Debt outstanding on 31 December (in thousand €) ................................................................ 69 Table 21 : Regional Debt stricto sensu outstanding on 31 December (in thousand €) .......................................... 70 Table 22 : Debt outstanding under ESA95 standard (in thousand €) .................................................................... 72 Table 23 : Debt outstanding under ESA2010 standard (in thousand €) ................................................................ 74 Table 24 : Portfolio cost of funding history ........................................................................................................... 75 Table 25 : Portfolio duration history ..................................................................................................................... 76 Table 26 : Guaranteed debt outstanding on December 31 (in thousand €) .......................................................... 79 Table 27 : Consolidated debt loans ....................................................................................................................... 80


Regional web portal :

Annual reports published in recent years by the Brussels-Capital Region, as well as the latest press

release from Standard & Poor's, are available for download on the website of Brussels Finance and

Budget :

http://finances-budget.brussels/agence

http://financien-begroting.brussels/agentschap-3

For more information:

Mr Faenza

T +32 (0)2 204 25 85

F +32 (0)2 204 15 57

[email protected]

Address:

Service Public Régional de Bruxelles

Bruxelles Finances et Budget – Agence de la Dette

(à l’attention de M. Faenza – CCN 8/18)

Rue du Progrès, 80/1

1030 Bruxelles

Editor:

Dominique Outers, Director-Head of Debt Agency Office – May 2017

© Brussels Regional Public Service

All rights reserved

http://finances-budget.brussels/agence

http://financien-begroting.brussels/agentschap-3


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