SPVs and Securitisation
Irish and EU authorities have recognised the importance of non-bank funding to the European economy. The European Commission has made the development of the European securitisation industry a key aspect of the Capital Markets Union (CMU) initiative.
Recognising that a high-quality framework for EU securitisation can promote integration of EU financial markets and help diversify funding sources, the EU Securitisation Regulation came into effect in January 2019. It reinforces the regulatory safeguards and disclosure requirements applying to securitisations and aims to build a sustainable securitisation market.
Securitisation – Stronger and Diversified Capital Markets
Securitisation allows banks to distribute risk across a wide range of investors so that they can engage in further lending. It also provides non-bank sponsors with access to a source of market-based finance.
Securitisation is an effective means to build stronger and more diversified capital markets by increasing the availability of credit and reducing the cost of funding. Unlocking capital makes it easier for credit institutions and lenders to lend to Small and Medium Sized Enterprises (SMEs), Homeowners and Customers. In particular, SPVs have enabled companies in the aircraft leasing, investment funds and reinsurance industries to establish financing companies and manage risk appropriately through the deployment of Special Purpose Vehicles (SPVs).
IDSA is an industry organisation established to promote a responsible, sustainable and effective environment within which debt securities and other specialist securities can be used to facilitate transactions, to create investment products and to raise capital funding, similar to that of the European Commission’s Capital Markets Union (EC CMU) initiative.
Ireland and SPVs
In Ireland, securitisation structures are established as Special Purpose Vehicles (SPVs). The SPV legal, regulatory and tax framework supports and underpins the other main international financial services sectors in Ireland.
Through a highly regarded and trusted legal and regulatory regime and a well-developed infrastructure, Ireland is now the leading European jurisdiction for the establishment and servicing of SPVs, securitisation structures and debt securities. With a network of specialist service providers, directors, advisers, listing agents and trustees, the industry in Ireland supports and services the widest range of structured finance deals. The sector employs 2,000+ people directly and many more indirectly in other industry sectors.
Irish SPVs are part of a wider global industry where:
- 86% of Irish SPVs have been set up by international sponsors
- The US and UK account for 65% of Irish domiciled SPVs
Find out more about Why Ireland for SPVs.
Irish SPVs: The Centre of the IFS Ecosystem
Loan origination/direct lending – as a means of providing finance directly to business and non-business customers.
Capital raising – by corporate groups to issue bonds or borrow money to finance the group’s activities.
Investment fund set ups – in order to isolate and hold particular assets within their portfolios. These companies are often funded exclusively by the investment fund.
Securitisations and Collateralised loan obligations (CLOs) – a securitisation company can acquire commercial loans and issue bonds to finance the acquisition.
Aircraft finance transactions – through the issuance of bonds to fund the purchase of one or more aircraft, which is then leased to an airline or airlines.
The Irish and EU Legal Regulatory Landscape
Irish SPVs are set up as Irish companies with tax neutrality and bankruptcy remoteness and are subject to:
- The Irish Legal and Regulatory Environment
- Irish company law
- Irish tax law
- Irish AML requirements (AML in the Structured Finance Sector in Ireland – Industry Note)
- Regulatory Reporting to the Central Bank
- Stock Exchange listing rules if listed
- The EU Legal and Regulatory Environment
- Transparency Directive, Prospectus Directive, Capital Requirements Directive and Market Abuse Directive
- Financial Vehicle Corporation (FVC) disclosure rules
- European Market Infrastructure Regulations (EMIR) for derivatives entered into by SPVs
- European Securities Regulation