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Securitisation in Ireland. Clive Jackson OECD Working Party on Financial Statistics, 2 November 2009. Securitisation in Ireland: Two themes. First theme: Securitisation carried out by Irish resident banks. Securitisation by Irish banks. First securitisation: IR£200 million in 1996

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Securitisation in Ireland

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securitisation in ireland

Securitisation in Ireland

Clive Jackson

OECD Working Party on Financial Statistics, 2 November 2009


First theme:

Securitisation carried out by Irish resident banks

securitisation by irish banks
Securitisation by Irish banks
  • First securitisation: IR£200 million in 1996
  • Outstanding amount of securitised mortgages now c. €38 billion
statistical treatment of securitisation
Statistical treatment of securitisation
  • Most commonly in Ireland, loans are purchased by a bankruptcy-remote vehicle created for this purpose (so-called SPV / SPE / FVC)
    • Loans are moved off balance sheets, giving a sharp fall in credit reported
    • Securitised residential mortgages must be added back in to correct for this when analysing volumes and growth rates:
recent developments
Recent developments
  • Securitisation activity accelerated despite freezing of market post-crisis
  • “Internal securitisations” used to create eligible assets for refinancing operations
    • Notes purchased by securitisation vehicles purchased by bank to use as collateral
    • Mortgages on balance sheets are replaced by debt securities holdings
issuance of asset covered securities
Issuance of Asset Covered Securities
  • It is possible for a bank to set up a “covered bond” bank
    • 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”
    • Issuance fell sharply in 2007, but rose in 2008
  • Statistical treatment
    • The mortgage bank is a credit institution covered by statistical reporting requirements
    • Loans on its balance sheet are captured – no adjustments are necessary

Issuance of mortgage-backed covered bonds in Ireland


Second theme:

Other securitisation vehicles resident in Ireland

wider population of securitisation vehicles
Wider population of securitisation vehicles
  • New ECB statistical regulation for Financial Vehicle Corporations passed Governing Council in December 2008 in order to:
    • contribute to analysis of monetary aggregates
    • harmonise treatment of securitised lending across the euro-area
    • provide information on alternatives to bank finance
    • examine wider issue of credit risk transfer
  • Ireland is one of the primary locations for FVCs in the euro-area
    • Structures enabled by Section 110 of the Taxes Consolidation Act 1997, as amended by Section 48 of the Finance Act 2003
    • 2003 legislation allows “Section 110s” to register with the Revenue Commissioners
    • They may then utilise certain treatments to ensure tax neutrality (e.g. with respect to paying interest or income to CDO investors)
  • New Regulation requires a national register of resident FVCs
    • First time such an exercise has been done – 900 vehicles currently
    • FVC definition is wider than what is traditionally thought of as securitisation (i.e. vanilla securitisations of banks’ mortgage books covered in banking statistics)
    • Some issues around the margins in determining whether some vehicles are inside or outside the FVC definition
fvc regulation ecb 2008 30
FVC Regulation ECB/2008/30
  • First collection of data from all resident FVCs with respect to Q4 2009
    • Central Bank deadline T+19 days
    • Transmission to ECB T+28 days
  • Derogation on some securitised loans data on FVC balance sheets
    • where loans are originated & serviced by an MFI in the euro-area, customer/geographic/ maturity of loans will be supplied directly to the respective National Central Bank
    • This data will be exchanged between Central Banks through the ECB
  • Derogation for smaller vehicles < €180 million
    • Only quarterly total assets/liabilities collected for small FVCs
    • The derogation may be applied so long as total assets of all derogated FVCs does not exceed 5% of population assets
    • Subject to annual review
what type of vehicles are in ireland
What type of vehicles are in Ireland?
  • 900 vehicles are currently on register of FVCs, total assets c. €500bn
    • Compare to €38 billion securitised by Irish banks
  • Residential and Commercial MBS make up one third of vehicles
  • CDOs (including CLOs, CBOs) make up 40%

Nature of securitisation (by number)

Types of securitisation vehicles (by number)

[Note: Data on this slide are preliminary estimates in advance of the first full collection of data in December.]


Thank you

Thank you