Asset Covered Securities Act, 2001

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Substitution of certain cover assets and restrictions on inclusion of substitution assets in cover assets pool of designated mortgage credit institution.

35.—(1) For the purposes of this section, “underlying asset”, in relation to a cover assets pool maintained by a designated mortgage credit institution, means a mortgage credit asset or a substitution asset that is then included in the pool.

(2) Subject to subsection (7), a mortgage credit asset or a substitution asset that replaces an underlying asset forms part of the relevant cover assets pool only if the replacement has been approved by the relevant cover-assets monitor.

(3) If an underlying asset included in a cover assets pool maintained by a designated mortgage credit institution contravenes or fails to comply with a provision of this Chapter, the regulations or a requirement of the Authority or the relevant cover-assets monitor made under such a provision, the institution shall, in accordance with this section, replace the underlying asset with a mortgage credit asset or substitution asset that the institution has acquired for the purpose or is currently holding.

(4) A designated mortgage credit institution may in any other case replace an underlying asset with a mortgage credit asset or a substitution asset that the institution has acquired for the purpose or is currently holding, but only if the replacement is not prohibited by a provision of this Chapter, the regulations or a requirement of the Authority or of the relevant cover-assets monitor under such a provision.

(5) A designated mortgage credit institution may not replace an underlying asset with a mortgage credit asset or a substitution asset if—

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

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

(c) the institution is insolvent,

(d) the Authority has given to the institution a relevant direction, the effect of which is to prohibit the replacement from being made,

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

(f) the Authority has given a direction under section 20 or 21 that prevents the replacement from being made.

(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 mortgage credit institution may not, without the consent of the Authority, replace an underlying asset with a mortgage credit asset or a substitution asset 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 mortgage credit institution may not at any time include a substitution asset in a cover assets pool maintained by the institution if, after including the asset in the pool, the total prudent market value of all substitution assets then included in the pool at the relevant time would exceed the prescribed percentage of the total prudent market value of all cover assets included in the pool. For the purposes of this subsection, the prescribed percentage is 20 per cent or, if an order under subsection (9) specifies some other percentage, that other percentage.

(9) The Minister may, by order notified in Iris Oifigiúil, vary the percentage referred to in subsection (8).

(10) The Authority may, by notice in writing given to a designated mortgage credit institution, suspend the application of subsection (8) to the institution for a specified period if it is satisfied that to do so would facilitate the discharge of secured claims against the institution. The notice may specify conditions subject to which the suspension is to have effect.

(11) The Authority may revoke a notice given under subsection (10) on the ground that the designated mortgage credit institution concerned has not complied with a condition specified in the notice.

(12) For the purpose of subsection (10), “secured claim” means a claim in respect of which the rights of a preferred creditor (other than a super-preferred creditor) are secured under Part 7.