Tuesday, 20 March 2007
Asset Covered Securities (Amendment) Bill 2007: Committee and Remaining Stages
I move amendment No. 1:
In page 10, between lines 7 and 8, to insert the following:
"(q) in the definition of "non-performing", in paragraph (b), by inserting "(but disregarding, for the purposes of this paragraph, section 4(4))" after"section 4(1)",".
This amendment concerns the definition of non-performing in the principal Act. Under the Bill as published securitised mortgage credit assets are regarded as non-performing after default in payments for three months or more. While this period is appropriate for mortgage loans it is not appropriate for securitised mortgage credit assets which are tranches of securitisation bonds. The effect of this amendment is to deem securitised mortgage credit assets to be non-performing if payments on them are in default for ten days or more. This is the same period of time that applies to public credit assets.
I move amendment No. 2:
In page 11, line 32, after "mortgage" to insert "credit".
This amendment concerns the term securitised mortgage credit assets that is used in the Bill. The definition of that term in section 2 of the Bill as published omits the word credit and this technical amendment corrects the omission.
In my short contribution I asked the Minister of State to outline the role of the Financial Regulator in the preparation of this Bill. The Minister of State made a second reference to what I presume was commercial expert legal advice and, as he did not reply to my query in his second Stage speech, can he tell us whether the Bill was drafted by the parliamentary draftsman or by private companies contracted for the purpose? Was the independent commercial legal advice provided freely or was it paid for by the State?
Regarding the definition of the terms, can the Minister tell us what was the role of the Financial Regulator? My question was legitimate and I felt deserved a legitimate answer so the Minister of State might give an explanation in this regard relating to the amendment.
The Bill was drafted by the parliamentary draftsman with professional advice from top legal and financial experts for which no payment was made. This was vetted by the European Central Bank in consultation with the Financial Regulator.
What does that mean? Did the Financial Regulator help to draft the Bill or what was its role? One of the biggest difficulties in the financial services sector in recent years arose in the area of reinsurance. The securitisation of mortgages is a parallel activity and many references are made to bonds in the Bill and in some jurisdictions the words bonds and junk are often not far removed. As Deputy Boyle pointed out, hedge funds and derivatives are a sophisticated form of gambling on the financial securities market. We have not had the benefit of a detailed briefing from the Department so I feel our questions are legitimate.
I remind the Minister of State that we are facilitating him. We got notice of this Bill late last week and, as he has said many times in the course of his presentation, it is very technical. We have not received much explanation of the Bill so I am asking the Minister of State to outline in detail the role of the Financial Regulator as it is supposed to be part of all of this.
The Irish Financial Services Centre suffered a significant amount of derogatory international comment, particularly in The Wall Street Journal, over reinsurance issues that arose. We are legitimately concerned that such issues have been addressed regarding this Bill.
This is a highly technical Bill with a great deal of intricate drafting. The Financial Regulator was involved in drafting the Bill, cleared and passed it and is satisfied with the Bill.
I move amendment No. 3:
In page 28, line 40, to delete "4, 61" and substitute "4(2) to (5), 58, 61, 71".
The purpose of this amendment is to correct this oversight, a drafting omission in section 30 of the Bill, the second line of the new section 41B, subsection (1), of the principal Act, to provide that the provisions of sections 58 and 71 should also apply as adapted to designated commercial mortgage credit institutions in addition to sections 4, 61 and 91. Certain terms used in sections 58 and 71 of the principal Act need to be modified in the case of the proposed new designated commercial mortgage credit institutions. For example, in section 71E the reference to a register of mortgage covered securities business needs to be amended to a register of commercial mortgage covered securities business. Likewise in section 58 the reference to mortgage credit assets needs to be amended to commercial mortgage credit assets.
The second amendment corrects a typographical error. The reference in the new section 41B, subsection (1)(k), to section 6 should instead refer to section 61.
I move amendment No. 4a:
In page 36, line 47, before "located" to insert "or substitution asset".
This amendment corrects an oversight and inserts the words "or substitution asset" in section 36. It makes this provision regarding public credit institutions consistent with the provisions concerning mortgage credit institutions in section 21.
I move amendment No. 5:
In page 45, lines 20 and 21, to delete "notified in Iris Oifigiúil".
The reference to notification in Iris Oifigiúil is unnecessary and will cause confusion as all statutory orders must be notified in Iris Oifigiúil under the Statutory Instruments Act 1947. The purpose of amendment No. 6 is to ensure the Houses are formally notified of orders made under the legislation.
The amendments concern the provisions of sections 59 to 61, inclusive. Section 59 inserts a new section 107 in the principal Act and provides that the Minister may, by order notified in Iris Oifigiúil, appoint a date for the purposes of Schedule 3. Schedule 3 is inserted in the Act by section 60. It deletes some obsolete terms such as references in the Act to "tier 1" and "tier 2" assets and definitions of the European Central Bank and National Central Bank.
The amendment seeks to delete the requirements for the order to be notified in Iris Oifigiúil and instead provide in amendment No. 6 to section 61 that the order under section 59, new section 107 of the Act, and any order made under section 61(3) bringing this Bill into operation, must be laid before both Houses of the Oireachtas. The laying of orders before both Houses is catered for in section 93(1) of the principal Act which provides that every order made by the Minister under the Act is laid before each House of the Oireachtas as soon as practicable after it is made. For this reason, I cannot accept the amendments.