| New liquidity rules facilitate Ulster mortgage pool deal |
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| An example of the responsiveness of the capital markets to the credit crisis was the use of new liquidity rules introduced by the Financial Regulator permitting residential mortgages to be treated as liquid assets if they are pledged under the Central Bank and Financial Services Authority of Ireland (CBFSAI) Mortgages Backed Promissory Note Scheme. This deal was quite urgent, the Regulator was responsive and the parties to the deal got the job done on time. |
The winner of the FINANCE Capital Issues Deal of the Year was Ulster Bank’s Mortgage Backed Promissory Notes Scheme, which raised €3 billion in December 2007.
The deal came about as new liquidity rules introduced by the Financial Regulator permitted residential mortgages to be treated as liquid assets if they are pledged under the Central Bank and Financial Services Authority of Ireland (CBFSAI) Mortgages Backed Promissory Note Scheme. Ulster Bank entered into this scheme whereby floating security was created over a pool of Ulster Bank residential mortgages in favour of the CBFSAI.
A&L Goodbody and McCann Fitzgerald advised on this deal. Nollaig Murphy, partner, A&L Goodbody, said that while the scheme had been in place for some time, it was only used in the current climate. ‘This was something relatively new, and it was noteworthy in that it was in the context of the liquidity needed in the market. This was a technical area, and a formality more than anything else, we accessed the scheme under new rules and were able to create a large pool of assets that were eligible under those rules. There were a few formalities around the pool and floating charge that have been amended, but we worked to satisfy the Regulator’
Daire Hogan, partner, McCann FitzGerald, said, ‘This represented, at a time when liquidity issues were receiving a heightened focus for credit institutions, the extension to Ulster Bank of collateral facilities for monetary policy purposes from the Central Bank and Financial Services Authority of Ireland.’
‘I suppose it was the fact that the scheme had been available and in place before, it was just that there was no need for it. Banks could access liquidity in other ways, but it became more important. The rule change meant that there was some work to be done in satisfying the Financial Regulator,’ Murphy said.
Importantly in this case, where time was an important factor, the deal went through relatively smoothly. Murphy said, ‘There were no hold ups in this case, and the Financial Regulator moved quickly”. |
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| Article appeared in the June 2008 issue.
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