Amendments are to be introduced to the law relating to the covered bonds market so as to improve Ireland's competitive position in the growing sector, and to comply with new EU provisions.
The Minister for Finance, Brian Cowen, said today the Government has approved the publication of the Asset Covered Securities (Amendment) Bill 2007, which updates the 2001 version.
The Asset Covered Securities Act 2001 allowed Irish banks, domestic and international, to raise funds on a competitive basis.
Covered bonds - or asset covered securities (ACS), as they are referred to in the Irish legislation - are a very cost-efficient form of funding for banks engaged in mortgage and public sector lending activities
They involve pooling assets, which are either residential mortgages or public sector loans in the Irish context, and issuing bonds against these pools.
Minister Cowen said :'Ireland is moving quickly to update the provisions of the 2001 Act in response to the developing nature of the business and to comply with new EU provisions relating to covered bonds'.
He said while the provisions of the Bill are quite technical, it is important as it provides a very competitive source of funding for mortgage lending by financial institutions, and it is the method by which Ireland's major mortgage lenders raise a considerable proportion of the funds they use for mortgage lending.
He said it will help to maintain the competitiveness of Irish-based banks engaged in covered bond issuance, and that we must move quickly to be among the first movers in terms of exploiting recent reforms under the EU's Capital Requirements Directive.
He added that it is important we safeguard this important niche but growing sector, as it is a source of high-level employment .
IBF's Chief Executive, Pat Farrell said : the legislative changes will be central to positioning Ireland for continued growth in the international covered bonds markets.
He said the Irish covered bond market has been a hallmark of Ireland's success in international financial services and, by end-2005, had become the sixth largest covered bonds market in Europe.
The latest estimates show that issuance of covered bonds in Ireland is expected to total €10 billion in 2007 alone, the IBF said.
