Ireland To Improve Covered Bonds Legislation

by Jason Gorringe, for LawAndTax-News.com, London

21 April 2006

Minister for Finance, Brian Cowen has announced that the government has approved proposals for draft legislation which will provide for the amendment and updating of the Asset Covered Securities Act 2001.

According to Cowen, the 2001 Act facilitated the establishment in Ireland of a covered bonds market on the basis of a robust legislative and regulatory regime. However, in response to the developing nature of the business, and to anticipate the coming into effect of new EU provisions, changes have been proposed in a bid to maintain and further enhance Ireland’s competitive position in the issuance of covered bonds.

Covered Bonds (or Asset Covered Securities) involve pooling assets, which are either residential mortgages or public sector loans in the Irish context, and issuing bonds against these pools of assets. The bonds are structured and legislatively underpinned in such a way as to provide a high level of security for investors, while making a competitive means of funding available for financial institutions. While the issuers of covered bonds are European banks, those who invest in the bonds (e.g., pension funds and banks) are located worldwide. Thus, Irish covered assets securities are a global capital markets product.

Since the enactment of the Act, bonds to the value of EUR44.8 billion have been issued in Ireland.

“My Department has worked closely with the Irish Bankers Federation, representing the Irish financial services industry and with the Financial Regulator on the proposals approved by Government," Cowen stated.

"It is a further example of co-operation between Government and industry to underpin the innovative dynamic which has made Ireland a centre of excellence for financial services," he added.

It is intended that formal drafting will now commence, with a view to passage through the Oireachtas in 2006.

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