Statistical Release Special Purpose Entities Statistics. Special Purpose Entities (SPEs) 1 Statistics Q Central Bank of Ireland - UNRESTRICTED

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1 Glo Statistical Release 19 September 2017 Special Purpose Entities (SPEs) 1 Statistics Q22017 The total asset value of Irish-resident securitisation vehicles, or Financial Vehicle Corporations (FVCs) 2, declined by 5 per cent to 391.3bn in Q2 2017, largely due to euro appreciation. The total assets of non-securitisation vehicles, or other Special Purpose Entities (SPEs) 3, declined by 3 per cent to 345.2bn in Q The number of reporting FVCs hit a historical high, reaching 906 vehicles in June 2017, an addition of 26 vehicles in the quarter. The number of other SPEs grew at a faster pace, reaching 1,033 vehicles in June 2017, an addition of 37 vehicles in the quarter. Mortgage backed securitisation (MBS) and resolution vehicles continued to decline in line with longer-term trends in Q Cash Collateralised Debt Obligations (CDO) was the only securitisation type to record an increase in total assets. Within other SPEs, total assets of all activity types decreased except for loan origination and operational leasing. 1 Definition of a SPE can be found on page 8 in Notes. 2 Definition of a FVC can be found on page 8 in Notes. 3 Definition of other SPEs can be found on page 8 in Notes. 1

2 Total assets of Irish SPEs declined to 737bn in Q2 2017, from 767bn in the previous quarter although the number of Irish resident SPEs increased by 63 vehicles to 1,939 entities in Q This pattern reflects a strong underlying growth trend in the number of entities coinciding with the unwinding of resolution vehicles holding mortgage backed security assets. The impact of euro appreciation vis-à-vis sterling and the US dollar is also having an impact on the euro value of the vehicles. The number of FVCs rose by 26 to reach 906 vehicles in Q2 2017, while total assets declined to 391.3bn from 412bn in Q (Chart 1a). Registrations for other SPEs grew more rapidly, increasing by 37 to 1,033 vehicles in Q2 2017, while total assets decreased to 345.2bn from 354.8bn (Chart 1b). Chart 1a: Total Assets and Number of Reporting FVCs billion Number of Reporting FVCs Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 Total Assets (LHS) Number of Reporting Irish resident FVCs (RHS) Source: Financial vehicle Corporations Statistics, Central Bank of Ireland 800 Chart 1b: Total Assets and Number of Reporting Other SPEs billion Number of Reporting Other SPEs 360 1, Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 Total Assets (LHS) Number of Reporting Irish resident other SPEs (RHS) Source: Other SPEs Statistics, Central Bank of Ireland 1,030 1,

3 New activity among Irish resident FVCs was mainly driven by Cash CDO, which increased total assets by 5 per cent since Q (Chart 2). Assets decreased in all other types of vehicles during the quarter, with Commercial Mortgage Backed Securities (CMBS) registering the most significant decline of 14 per cent. This is in line with the longer-term trend seen in FVC registrations, characterised by an ongoing reduction in the share of mortgage-backed securitisation (MBS). Chart 2: Evolution of FVC types since Q (total assets) billion Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 Source: Financial Vehicle Corporations Statistics, Central Bank of Ireland Within other SPEs, three types of vehicles accounted for 65 per cent of total assets in Q2 2017: fund-linked investments, intra-group financing and external financing. Operational leasing and loan origination activity remained constant in terms of total assets, with the former accounting for 23 out of 37 registrations in Q and the latter largely denominated in euro. Total assets of other vehicle types decreased, in particular resolution vehicles which declined by 11 per cent (Chart 3). 3

4 Chart 3: Evolution of other SPEs types since Q (total assets) billion Fund-Linked Investments Intra-Group Financing External Financing Loan Origination Operational Leasing Resolution Vehicle Bank-Linked Investments Other Source: Other SPEs Statistics, Central Bank of Ireland 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 Information on sponsor, i.e. the entity on whose behalf the SPE was established, allows a better identification of sector and country links, which is particularly relevant given the international activities of Irish-resident vehicles. Within FVCs, investment fund-sponsored vehicles accounted for 18 out of 26 registrations in Q with total assets increasing by 29 per cent. On the other hand, bank-sponsored vehicles asset value decreased by 8 per cent since Q1 2017, while still accounting for 46 per cent of the total FVC assets (Chart 4). In terms of sponsor country, five countries accounted for 85 per cent of total FVCs asset value in Q2 2017: United Kingdom, United States, Ireland, France and Germany (Chart 5). The United Kingdom represented 15 out of 26 registrations in Q2 2017, and 29 per cent of total FVCs asset value, with total assets remaining constant from Q

5 Chart 4: Breakdown of Irish resident FVCs Sponsor sector Q % 2% Banks 11% 6% 46% Financial Auxiliaries Financial Vehicle Corporations Government 32% Insurance Corporations Investment Funds Except MMFs Source: Financial Vehicle Corporations Statistics, Central Bank of Ireland Non-Financial Corporations Chart 5: Breakdown of Irish resident FVCs Sponsor country Q % 6% 8% 19% 23% 29% United Kingdom United States Ireland France Germany Other Source: Financial Vehicle Corporations Statistics, Central Bank of Ireland Within other SPEs, non-financial corporations, financial auxiliaries and banks are the principal sponsors (Chart 6). Other financial intermediaries-sponsored vehicles represented 24 out of 37 registrations in Q2 2017, with total assets increasing by 4 per cent. Investment fundsponsored vehicles mirrored the trend of their FVC counterparties, with an increase of 25 per cent in total assets from Q1 2017, representing the highest increase among the sectors. In terms of sponsor country, three countries accounted for 61 per cent of the total assets of other SPEs in Q2 2017: United States, United Kingdom and Russia (Chart 7). Cayman Islands accounted for 17 out of 37 registrations in Q

6 Chart 6: Breakdown of Irish resident other SPEs Sponsor sector Q % Banks 32% 26% Financial Auxiliaries Financial Vehicle Corporations Government Households and Non-Profit Institutions Serving Households Insurance Corporations 2% 1% 1% 1% 2% 30% Investment Funds except MMIFs Non-Financial Corporations Source: Other SPEs Statistics, Central Bank of Ireland Chart 7: Breakdown of Irish resident other SPEs Sponsor country Q % 39% 22% United States United Kingdom Russia Other 14% Source: Other SPEs Statistics, Central Bank of Ireland 6

7 Appendix Chart A.1: Composition of Irish FVC Assets % Q1 Q2 Q3 Q4 Q1 Q Assets - Deposits and loan claims Assets - Securitised loans Assets - Other securitised assets Assets - Securities other than shares Assets - Shares and other equity Assets - Other assets Source: Financial Vehicle Corporation Statistics, Central Bank of Ireland. Chart A.2: Composition of Irish FVC Liabilities % Liabilities - Other liabilities Liabilities - Capital and reserves Liabilities - Debt securities issued Q1 Q2 Q3 Q4 Q1 Q Liabilities - Loans and deposits received Source: Financial Vehicle Corporation Statistics, Central Bank of Ireland. 7

8 Notes These data were collected under the requirements of Regulation (EC) No. 24/2009 concerning statistics on the assets and liabilities of financial vehicle corporations engaged in securitisation transactions (ECB/2008/30), which was passed on 19 December 2008, obliging financial vehicle corporations to report quarterly balance sheets. Reporting is obligatory for all financial vehicle corporations resident in Ireland. The full data series for Ireland is available on the Central Bank of Ireland website here and euro area statistics are available from the ECB website here. A Special Purpose Entity (SPE) is a legal entity created to fulfil narrow, specific or temporary objectives. Financial vehicle corporations (FVCs) are undertakings which are constituted pursuant to National or Community Law and whose principal activity meets both of the following criteria: to carry out securitisation transactions which are insulated from the risk of bankruptcy or any other default of the originator; to issue securities, securitisation fund units, other debt instruments and/or financial derivatives, and/or to legally or economically own assets underlying the issue of securities, securitisation fund units, other debt instruments and/or financial derivatives that are offered for sale to the public or sold on the basis of private placements. Securitisation refers to a transaction or scheme whereby: (i) an asset or pool of assets is transferred to an entity that is separate from the originator and is created for or serves the purpose of the securitisation; and/or (ii) the credit risk of an asset or pool of assets, or part thereof, is transferred to the investors in the securities, securitisation fund units, other debt instruments and/or financial derivatives issued by an entity that is separate from the originator and is created for or serves the purpose of the securitisation. Other Special Purpose Entities (other SPEs) are vehicles not engaged in securitisation. Further information For queries contact: Central Bank, Press Office at press@centralbank.ie or (01)