Tom Parlon (Laois-Offaly, Progressive Democrats)

I thank the Senators who participated in the debate for their appreciation of why it is necessary to expedite progression of the Bill at this busy time for the House. I well understand the task of making a constructive contribution to a debate on extremely complex legislation such as this and its parent Act which it amends could represent a serious challenge. I was concerned that Senator Phelan was going to state his specialised subject was asset covered securities, of which he showed a substantial grasp, as did Senators Mansergh and Dardis. I appreciate this.

Asset covered securities or covered bonds play an increasingly prominent role in international capital markets. Ireland's entry into the covered bonds sector on foot of the 2001 Act was a major success, as other speakers and I stated. The international financial services area is not one in which we can rest on our laurels. With greater integration of financial services throughout the European Union more and more member states are getting involved in this activity. This means increasing competition between financial centres throughout the Union to serve as locations for the issuance of this type of bond.

As I made clear in my opening address, the major reforms following on from implementation of the capital requirements directive in so far as they relate to the covered bonds sector will be carried into our legislation by the Bill. We are one of the early movers in this regard. This gives us an opportunity to enhance Ireland's attractiveness as a centre for the issuance of these highly regarded bonds. As legislators, we must move quickly in this regard. While this type of covered bond is mainly a European banking product, the merits of this type of financing technique are now becoming more widely appreciated and large US banks are beginning to become involved in issuance.

I would regard this latter development as being very positive, as it should mean that American banks in general will become more familiar with this product and will be more likely to invest in these types of bonds. This will help grow the market overall, and if some of these US banks decide to channel some of their issuance activities through European financial centres, Ireland will be glad to welcome them. For the present and near term, our most likely source of new bond issuance to locate or relocate here is from the EU.

I will briefly deal with some of the issues raised. With regard to US difficulties in the mortgage market, I assure Senators that the downturn in that country's property market should not affect Irish asset-covered securities. The ACS legislation has asset quality requirements that ensure the quality of the cover pool. The assets of the pool are very conservatively valued, and non-performing loans and loans that do not meet the loan-to-value requirements are replaced. In this way the high quality of the covered asset pool can be maintained.

Senator John Paul Phelan raised the matter of the high level of credit in the country. The growth in credit is a matter for the Central Bank through its participation in the ECB, where interest rates are set. That issue would not arise here. Senator Dardis made the important point that the Bill is largely about getting a balance between regulation and continuing to attract the very substantial business we are getting.