Page 271 - Invited Paper Session (IPS) - Volume 1

IPS152 Giovanna B. et al.
Figure 1a and 1b: Non-securitisation SPEs by sponsor and by activity
(total assets)

Focusing on domestic links, Irish sponsors (€44 billion) are mostly multi-
national Non Financial Corporations (NFCs), including some companies that
re-domiciled their headquarters to Ireland and are engaged in intra-group
financing, external financing and operational leasing activities. Fund-linked
investments linked to Irish-resident investment funds are also significant
though these are largely sponsored by foreign fund managers. Most Irish
sponsored SPEs are consolidated into the accounts of Irish entities (€36 billion)
though consolidation into the accounts foreign entities also occurs (€2 billion).
Within the non-securitisation SPE population as a whole, over half of total
assets are consolidated into the accounts of other entities.
Based on this data, and in liaison with regulatory colleagues, Golden and
Hughes (2018) developed the concept of SPEs (securitisation and other) as
follows:
“a legal entity, with little or no physical presence and narrow, specific,
and/or ring-fenced, objectives, such as the segregation of risks, assets
and/or liabilities, or as a cash conduit. The directors of an SPE typically
have limited or no discretionary powers; rather activities are strictly defined
by the terms of the SPE contract or arrangement. An SPE is often, though
not exclusively, a satellite company of another financial entity and forms
an ancillary part of the associate entity’s business by warehousing
particular assets or risks.”

These SPE contracts are drawn up in accordance with the wishes of the
SPE sponsor. The activities of the SPE are conducted in accordance with the
specific terms of the contract. The SPE directors cannot act outside the terms
of the contracts. This could be seen as a measure of control by the sponsor.
Risks are distributed between SPE counterparties according to the provisions
of each contract.

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