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Overview of securitisation activities in Ireland. Clive Jackson OECD WPFS , Securitisation Workshop, 2 7-28 May 20 10. Overview of securitisation activities. Quarterly data collected under FVC Regulation ( ECB/2008/30 ) from Q4 2009

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overview of securitisation activities in ireland

Overview of securitisation activities in Ireland

Clive Jackson

OECD WPFS, Securitisation Workshop, 27-28 May 2010

overview of securitisation activities
Overview of securitisation activities
  • Quarterly data collected under FVC Regulation (ECB/2008/30) from Q4 2009
  • Ireland is one of the primary locations for FVCs in the euro-area (over 800 entities) in terms of total assets and range of activities
  • Data collected allows the first analysis of activities of domiciled vehicles which are unconnected with the domestic banking sector
    • Main discussion point: the usefulness of qualitative information for analysis
  • Legal framework
    • Current framework comes under Section 110 of the Taxes Consolidation Act 1997, as amended by Section 48 of the Finance Act 2003
    • “Section 110s” must register with the Revenue Commissioners, they may then utilise certain treatments to ensure tax neutrality
    • Very broad range of financial assets may be held – e.g. equities, bonds, receivables, leases, derivatives (synthetic transactions)
    • A qualifying company may not hold property (although could own shares in a property holding company)
  • Securitisation carried out by Irish banks
    • First securitisation of IR£200mn in 1996. Current outstanding securitised mortgages c. €37bn
    • Securitisation is also possible through covered bonds. Enabled by 2001 legislation, first carried out in 2004. Loans may be transferred to a designated “mortgage bank” under the 2001 legislation, which may then issue Asset Covered Securities. FVCs are not used – loans stay on the MFI balance sheet.
rmbs originated by irish banks
RMBS originated by Irish banks
  • First period of growth : Predominantly used by specialist mortgage lenders in early stages.
  • Second period of growth : Originate and distribute model - important role in filling funding gap and facilitating period of strong credit growth.
  • Third period of growth: Securitisation activity has accelerated despite freezing of market post-crisis – “internal securitisations” used by MFIs to create eligible assets for refinancing operations.
fvc regulation ecb 2008 30
FVC Regulation ECB/2008/30
  • Quarterly collection from resident FVCs from Q4 2009
    • Reporting agents on behalf of FVCs may be the administrator, collateral manager, bank
    • Central Bank of Ireland deadline: T+19 days
    • Transmission to ECB: T+28 days
  • Requirement covers balance sheet, financial transactions and loan write-downs
    • Reporting agents may use quarterly/monthly investor reports (or similar) to compile returns, even if the reference date does not match reporting date
    • Security-by-security reporting of debt securities holdings
  • Reduced reporting requirement for smaller vehicles
    • For FVCs with total assets under €180 million at end-Q4
    • Provide one figure – total assets – and a list of ISIN codes in issue
    • Applies to over one third of FVCs
    • However, these together make up less than 5% of total assets for the sector as a whole
information on fvc activities
Information on FVC activities
  • Official register of FVCs maintained by the National Central Banks and ECB – the nature of securitisation must be provided
  • Also, FVCs were requested to categorise their activities: e.g. Residential MBS, Consumer ABS, CDO, etc.
  • Where this information is not provided or not sufficiently clear, this is supplemented with information from alternative sources, e.g. the prospectus, audited annual accounts, etc
  • Together – nature of securitisation and type of activity – provides a useful picture of the sector and tool for analysis
nature of securitisation
Nature of securitisation
  • FVC Regulation: sector balance sheets aggregated on the basis of the nature of securitisation:
    • True-sale (or traditional)
    • Synthetic
    • ‘Other’ FVCs
  • ‘Other’ category contains hybrid FVCs (carrying out both true and synthetic securitisations), and some vehicles where the nature is to be confirmed.
activities of fvcs
Activities of FVCs

Note: Prelimary data

residential mbs
Residential MBS
  • Most assets are securitised loans,of course
  • Some synthetic securitisations are also included.
    • General point: Synthetic securitisations may not always be fully funded – important in thinking about credit risk transfer.
  • Other assets relate to RMBS securitisations where the issuing FVC is in Ireland, but loans held in FVC elsewhere
  • Originators: mostly euro area banks
    • Very little by OFI (non-bank mortgage providers)
commercial mbs
Commercial MBS
  • Mostly originated in the euro area (outside Ireland) or by a Rest of World originator
  • Over 40 FVCs are using a derogation providing full breakdowns for loans originated and serviced by euro area MFIs
    • Instead these breakdowns will be collected from banks by National Central Banks
    • Data exchange between National Central Bank and domicile of FVC (facilitated by ECB)
  • We have recorded originating/servicing bank linked to the FVC to help this process
consumer abs
Consumer ABS
  • Not a feature domestically
  • Small volumes compared to mortgage securitisations
  • Mix of euro area bank and non-euro area originators
  • Includes securitisations of auto loans, credit card debt.
corporate abs
Corporate ABS
  • Broad in terms of originators. Sometimes linked to specific NFC company or group
  • Securitisation of trade or other receivables
  • Securitisations of leases
  • Smallest FVC average size (by total assets)
  • Interesting in terms of alternatives to bank financing and unsecured forms of financing
  • Security-by-security data may be useful (where available)
cdo s and clos
CDOs and CLOs
  • These make up the largest proportion of vehicles
  • FVCs balance sheets can be used to determine if they are Collateralised Loan Obligations, as opposed to other type
  • Diversity of structures and strategies, including:
    • Vehicles with ‘static’ portfolios
    • Vehicles with ‘managed’ portfolios with an active investment manager
    • Variety of strategies and motivations
  • Loan syndications
    • Challenges in assigning originators
asset backed commercial paper
Asset Backed Commercial Paper
  • Mostly vehicles purchasing assets as part of a programme with the CP issuer elsewhere (e.g. USA)
  • Profile of debt securitised issued is less than one year
  • Large average size (around €1.5bn)
  • Interesting in terms of links to arranging banks and other FVCs (often in other jurisdictions)
multi issuance programmes
Multi-issuance programmes
  • One FVC (Multi-Issuance Vehicle) may be used for a programme of note issuances (numbering perhaps dozens)
  • Collateral for each series is ring-fenced through contracts to a specific issuance – issuances are made independent and bankrupt-remote from each other
  • Similar to programmes available in Luxembourg, but there each issuance (‘compartment’) is a separate legal entities
  • MIVs can issue both true and synthetic series within the one vehicle
other activities
Other activities
  • Miscellaneous other category for the moment
  • Some FVCs not assigned to any category
  • Also includes FVCs set up by international institutions to warehouse banks’ “bad assets”
  • It will include the Irish version of same, which is also using a number of FVCs
  • FVCs are a very heterogeneous group.
    • Analysis of the sector is greatly enhanced by additional qualitative information on the vehicle
    • This information also helps spot where some items may be reported incorrectly
  • Good news:
    • Even high level information is useful, but more detailed info may be available without too much effort ...
    • Some information may already be available within Central Banks (e.g. for eligible collateral) or Regulators (supervision of banks and their exposures)
    • A lot is available publicly, or from commercial providers, stock exchanges, etc
    • Can this be exploited at a euro-area level?
  • Opportunities:
    • Additional information on linkages between FVCs would be useful to compilers
    • Information on links between FVCs and their MFI sponsors/arrangers would be useful for understanding the sector developments (potentially useful to supervisors?)

Thank you.


Thank you