Asset Covered Securities Act, 2001

Designated public credit institution to establish and maintain cover assets pool.

47.—(1) A designated public credit institution may issue public credit covered securities only if it is maintaining a related cover assets pool that complies with this Chapter.

(2) After a designated public credit institution is registered, the institution may, for the purpose of establishing a cover assets pool and enabling it to make an initial issue of public credit covered securities, include in its register of public credit covered securities business public credit assets or substitution assets in accordance with this Chapter.

(3) If a designated public credit institution wishes at any time to issue further public credit covered securities, it may include in the relevant cover assets pool public credit assets or substitution assets as security for those securities in accordance with this Chapter.

(4) Subject to subsection (7), a public credit asset or a substitution asset referred to in subsection (2) or (3) forms part of the relevant cover assets pool only if its inclusion has been approved by the relevant cover-assets monitor.

(5) A designated public credit institution may not include a public credit asset or substitution asset in a cover assets pool in the circumstances referred to in subsection (2) or (3) if—

(a) the public credit asset or substitution asset is currently included in a different cover assets pool maintained by the institution,

(b) the public credit asset or substitution asset is non-performing,

(c) the institution is insolvent,

(d) the Authority has given the institution a relevant direction, the effect of which is to prohibit the asset from being recorded in the institution's register of public credit covered securities business,

(e) the Authority has given the institution a notice under section 19 (3) informing the institution that the Authority intends to seek the consent of the Minister to the revocation of the registration of the institution as a designated credit institution, or

(f) the Authority has given a direction under section 20 or 21, the effect of which is to prohibit the asset from being recorded in the institution's register of public credit covered securities business.

(6) For the purposes of subsection (5)(d), “relevant direction” means a direction issued under—

(a) section 11 or 21 of the Central Bank Act, 1971 ,

(b) section 26 of the Trustee Savings Banks Act, 1989 , or

(c) section 40(2) of the Building Societies Act, 1989 .

(7) A designated public credit institution may not, without the consent of the Authority, include a public credit asset or substitution asset in a cover assets pool maintained by the institution in the circumstances contemplated by subsection (2) or (3) if—

(a) the institution is potentially insolvent, or

(b) there is currently no cover-assets monitor appointed in respect of the institution.

(8) A designated public credit institution shall ensure—

(a) that a cover assets pool maintained by the institution has a duration of not less than that of the public credit covered securities that relate to the pool,

(b) that the prudent market value of the pool is greater than the total of the principal amounts of those securities,

(c) that the total amount of interest payable in a given period of 12 months in respect of the pool is during that 12 month period not less than the total amount of interest payable in respect of that period on those securities, and

(d) that the currency in which each public credit asset and each substitution asset included in the pool is denominated is the same as the currency in which those securities are denominated,

after taking into account, in the case of paragraphs (b), (c) and (d), the effect of any cover assets hedge contract that the institution has entered into in relation to the pool and those securities.

(9) For the purposes of subsection (8)(a), “duration” means, in relation to a cover assets pool or public credit covered securities—

(a) if interest payable in respect of a public credit asset or a substitution asset included in the pool, or in respect of the securities is variable, a discounted weighted average term to maturity of the relevant principal amount of the pool or securities, or

(b) if interest payable in respect of a public credit asset or a substitution asset included in the pool, or in respect of the securities, is fixed, a discounted weighted average term to maturity of the relevant principal and interest payable but unpaid in respect of the pool or securities,

determined in accordance with a formula or criteria specified in a regulatory notice made for the purposes of this subsection, using appropriate zero coupon interest rates and taking into account the effect of any relevant cover assets hedge contract entered into by the institution in relation to the pool and those securities.

(10) The Authority may, by regulatory notice published in Iris Oifigiúil, specify a formula or criteria for the purposes of the definition of “duration” in subsection (9).