Gerald Nash (Louth, Labour)
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243. To ask the Minister for Finance his plans to review section 110 provisions given that Russian companies outside of the banking sector accounted for over 60% of the €35.5 billion in assets held in Irish special purpose vehicles used for funding purposes at the end of 2021 (details supplied); and if he will make a statement on the matter. [14309/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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It is first important to note that Russia’s war is illegal, immoral and unjustified. Ireland’s support for Ukraine’s sovereignty and territorial integrity is unwavering.

We have been working closely with our EU partners and fellow Member States in the adoption of sanctions in response to Russia’s violation of Ukraine’s territorial integrity and all aspects of the EU sanctions packages agreed to date, including those related to the financial sector, have been implemented immediately.

Sanctions will not be cost-free for the EU and Ireland, but Russia’s behaviour leaves no alternative. Entities in the Financial Services Sector in Ireland, including section 110 special purpose entities, are within scope of the sanction measures agreed unanimously by the 27 EU Member States. The sanctions apply in respect of the provision of funds either directly or indirectly to sanctioned persons, as set out in Council Regulation (EU) No 269/2014.

Central Bank data shows that the direct exposures of the Irish Financial System as a whole to Russia are very small. A statistical release on the direct financial links to Russia by economic sector, issued on 4th March and incorporating the latest available data on financial services sectors, stated that, at end-2021, Special Purpose Entities (SPEs) had holdings of €37.1 billion of Russian-issued assets. There were 33 Russian sponsored SPEs identified with total assets of €35.5 billion, accounting for 8% of the non-securitisation SPE sector. Russian-issued assets held by regulated investment funds represented 0.3% of total assets held by regulated investment funds (or €11.5 billion in total). The exposure of on and off balance sheet financial assets and liabilities to Russian counterparties held by Irish authorised banks represented 0.1% of total (or €1.7 billion in total).  Russian-issued securities held by Insurance companies represented 0.1% of the sector's total assets (or €97 million in total).

Section 110 is intended to create a tax neutral regime for bona-fide securitisation and structured finance purposes.  Securitisation involves the creation of tradeable securities out of an income stream or projected future income stream generated by financial assets.  Securitisation allows banks to raise capital and to share risk and, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing.  Such financing is useful for the productive economy as it can underpin the supply of finance to industries and companies in Ireland, Europe and further afield. 

Ireland is not unique in having a specific regime for securitisations. The importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union.  A main objective of the Capital Markets Union is to build a sustainable securitisation regime across the European Union.  It is important to note that there is nothing specific in the Section 110 regime that is of particular relevance to Russian investors or originators, and such vehicles are fully in scope of the sanctions regime.

Notwithstanding this, my officials monitor the regime on an ongoing basis, and where issues of concern have been identified I have taken steps to address them.