Asset Covered Securities - ACS

1	Who is the issuer?	Specialized credit institution
		Comments: The specialised credit institution is known in the Asset Covered Securities (ACS) framework as a Designated Credit Institution (DCI). DCIs are further designated as a Designated Mortgage Credit Institution, Designated Commercial Mortgage Credit Institution, or a Designated Public Credit Institution to issue each particular types of ACS. DCIs can be authorised to issue more than one type of ACS, though maintaining separate cover pools for each.

2

Does the bondholder have recourse to the credit institution?

Yes, direct

3

Who owns the cover assets?

The issuer directly

4	Is the issuer the originator of the assets?	Yes
		Comments: In general the issuer would be the originator of the assets. However, within a group situation assets may be transferred from a parent to its subsidiary Designated Credit Institution. An issuer may also purchase assets on the secondary market.

1

Are the bonds governed by a special covered bond Legislation?

Yes

2

What is the legal framework for bankruptcy of the issuer of covered bonds?

Specific legal framework superseding the general insolvency law

1

What types of assets may be included in cover pools?

Exposures to public sector entities Mortgage loans (Mortgage loans for the purpose of this question are taken to include guaranteed real-estate loans.) Group originated Senior MBS Senior MBS issued by third parties Exposures to credit institutions

2

What is the geographical scope for public sector assets?

Domestic Multilateral development banks EEA CH USA, Canada, Japan NZ AUS

3

What is the geographical scope for mortgage assets?

Domestic EEA CH USA, Canada, Japan NZ AUS

4	Are regular covered bond specific disclosure requirements to the public mandatory?	Yes
		Comments: DCIs are required to disclose certain information in their annual accounts. A Designated Mortgage Credit Institution or Designated Commercial Mortgage Credit Institution must disclose: • Mortgage accounts and principals outstanding on the mortgage cover pool • Geographical location and details of the pool • Pool accounts in default at year end • The number of non-performing mortgage credit assets replaced during the financial year • The total amount of interest in arrears in respect of mortgage credit assets that has not been written of at the end of the financial year • The total amount of payments of principal and interest repaid in respect of mortgage credit assets A Designated Public Credit Institution must disclose the names of countries for the location of those assets, the number of assets, and percentage of overall pool.

1

LTV is calculated using which valuation?[4]

Market value

2

Are there any special LTV limits used solely for calculating collateralisation rates for the cover pool (if yes, specify)?

Residential       75% Commercial       60%

3

Do bondholders get the benefit of that portion of the loan which exceeds the LTV cap?

Yes

4a

Is there an LTV cap which makes the entire loan ineligible to be put in the cover pool (if yes, specify)?

No

4b

Is there an LTV cap which would require a loan to be removed from the cover pool?

No

5

Is there any additional LTV limit on a portfolio basis?

Yes (if yes specify) 80%

Exposure to market risk

1	Is exposure to market risk (e.g. interest rate, currency risks) required to be mitigated by law or contract?	Yes
		Comments: Yes, by law

2

What is the primary method for the mitigation of market risk?

Use of derivative hedge instruments

3

If the answer to the above question on market risk mitigation is “Use of derivative hedge instruments”, please specify whether those instruments are entered into:

By the time of issue of covered bonds or entry of asset in the cover pool

4

What type of coverage test is applied?

Nominal cover Present value cover

5	What is the frequency of coverage calculations?	Weekly Monthly
		Comments: Coverage calculations are carried out weekly by public sector DCIs, and monthly for mortgage DCIs. Coverage calculations are also made when assets are entered or removed from the cover pool and when bonds are issued.

6	What types of stress scenarios are applied?	Model based (i.e. VaR)
		Comments: Plus or minus 1% shift in the yield curve, and plus or minus 1% shift in the slope of the yield curve (twisted curve)

7

What is the frequency of stress test calculations?

Daily

Exposure to liquidity risk

8	Is exposure to liquidity risk required to be mitigated by law or contract?	Yes
		Comments: Yes, by law

9	What is the primary method for the mitigation of liquidity risk on interest payments?	“Natural” matching (matching without the use of off-balance sheet instruments) and stress testing (Natural matching is taken to include replacing CBs with new issues, as well as substitute assets.)
		Comments: For public sector ACS the duration of the assets cannot exceed the duration of the securities by more than 3 years on a weighted average basis. Mortgage ACS issuers have access to the Mortgage Backed Promissory Note programme, under which they can use mortgage assets not allocated to the ACS programme to access liquidity through the ECB. Furthermore, mortgage ACS tend to have 12 month extendable maturity.

10

What is the primary method for the mitigation of liquidity risk on principal payments?

11

Is there any grace period in case of a breach of liquidity risk mitigants?

No

12	What is the consequence of not fixing a breach of liquidity risk mitigants?	Programme freeze (neither sale of assets nor new issuance allowed)
		Comments: A number of actions are possible from the Financial Regulator, including programme freeze or removal of licence.

Monitoring of exposures to market and liquidity risk

13

Who monitors the maintenance of coverage tests?

Supervisory authority Rating agency Trustee/cover pool monitor

14	Are there any regular public reporting requirements for market and liquidity risk?	Yes
		Comments: The DCI’s market risk and liquidity risk exposures are reported in the annual financial accounts.

Overcollateralisation

15

Is mandatory minimum overcollateralisation required?

By legislation/regulation By contractual obligation

16	What is the level of minimum mandatory overcollateralisation?	103%
		Comments: 103%, but 110% for Commercial Mortgage ACS. The regulatory minimum OC is calculated on a PV basis. In addition, ACS issuers have committed contractually to 105% OC on a nominal basis.

17

If mandatory overcollateralisation is required, are the amounts above the minimum OC level protected?

Yes

18

Is there any grace period in case of a breach of the coverage test?

No

19	What is the consequence of not fixing a breach of the coverage test?	Programme freeze (neither sale of assets nor new issuance allowed) Other regulatory or rule-based actions
		Comments: A number of actions are possible from the Financial Regulator, including programme freeze or removal of licence.

1

Is a special license required for the issuing of covered bonds?

Yes with additional requirements compared to general banking supervision regulations

2

Are there special reporting duties of the covered bond issuer to the supervision authority concerning covered bonds and the cover pool, which go beyond the regular banking supervision?

Periodic reporting required

3

What is the role of the banking supervision regarding covered bonds?

To check whether eligibility criteria are fulfilled and documented Checking quality of cover assets (real estate valuations, etc) Monitoring of exposure to market risk and liquidity risk Evaluation of operational risk To check minimum mandatory overcollateralisation requirements

4

Is there a special role of banking supervision in crisis regarding covered bonds?

Safeguarding ongoing management of the cover pool directly or via a special administrator Involvement in transfer of cover assets and covered bonds to another credit institution

5

Is there a cover pool monitor independent from the issuer?

Yes

6

If there is an independent cover pool monitor, what are its duties?

Performing audits of the cover pool Reporting duties to the supervision authority Verification of coverage tests Other, please specify:       Sign off on all assets being placed in or removed from the cover pool

1

Do covered bonds automatically accelerate when the credit institution goes insolvent?

No

2	What is the cover pool?	All assets on the cover register
		Comments: All assets (public sector or mortgage), substitution assets, cover assets and hedge contracts on the cover register

3

How are the covered bondholders protected against claims from other creditors in case of insolvency of the issuer?

Preferential claim by law

4

Is there recourse to the credit institution’s insolvency estate upon a cover pool default?

Yes, pari passu with unsecured creditors

5	Are there provisions that require derivatives to continue in case of insolvency of the credit institution?	Yes
		Comments: The hedges survive pursuant to the terms of their contracts.

6

If derivatives are permitted in the cover pool, what is their ranking?

Pari passu to covered bond holders

1

Does the covered bond fulfil the criteria of UCITS 52(4)?

Yes

2

Does the covered bond legislation completely fall within the criteria of the Annex VI, Part 1, Paragraph 68 (a) to (f) of the Capital Requirements Directive (CRD)?

Yes

3

Are listed covered bonds eligible in repo transactions with the national central bank?

Yes

4

Are there any special investment regulations regarding covered bonds?

No

1

Link to National Association representing covered bond interests

Association Irish banking Federation (ACS Ireland)

2

Link to national regulators and supervisors

List Central Bank of Ireland

3	Fact Book Country Chapter	Chapter
		Ireland

4	Hypostat Country Chapter	Chapter
		Ireland.pdf