By Richard Johnstone | 25 October 2013

A local government bond agency has been created in France to allow councils to borrow to fund capital projects.

The agency, which is open to all French councils, was established at a meeting in Paris on October 22. It will now enter into discussions with French regulators to determine how the scheme will be monitored, which is expected to take place throughout the first half of next year.

Once these talks are complete, the Agence France Local will begin to issue joint municipal bonds, with the money raised then lent on to member councils to pay for infrastructure developments and other projects.

Eleven member authorities signed up to the scheme at its launch, including Bordeaux, Lille and Lyon, after the French government pledged to back the project.

The French agency joins the five local government funding agencies already in place across Europe, and comes as the UK Local Government Association considers the establishment of one.

It is made up of two companies – a cooperative society that will set the strategy for the agency, and a financial firm that will issue the bonds and supervise the investments.

Lars Andersson, who founded the Kommuninvest agency in Sweden and has been advising on the establishment of the French agency, said a chief executive would be appointed to run the agency in the beginning of December.

He told Public Finance International there were as many as 40 other local authorities in France in line to join. Each will need to meet a number of conditions for membership, including contributing capital so the agency meets financial sector regulations, such as the Basel III provisions.

‘It will build up a number of members during the next year,’ he added.