IMF queries lawyers and bankers on hundreds of IFSC boards

Special-purpose vehicles home to more than €700bn of assets

The International Monetary Fund (IMF) has raised concerns about instances where individual bankers and lawyers were appointed to hundreds of boards of unregulated special-purpose vehicles in Dublin's International Financial Services Centre.

Companies Registration Office records show individuals at law firms such as Matheson and Deutsche Bank, Europe's largest investment bank, have scores of board memberships on these tax-efficient entities, which can hold various financial assets from distressed-debt to greenhouse-gas credits and catastrophe bonds sold by insurers.

The entities are commonly used in international financial services hubs.

Irish special-purpose vehicles (SPVs) set up under section 110 of the Irish Taxes Consolidation Act, 1997, have come under the increasing attention of the Central Bank, Revenue Commissioners, Government and international authorities, such as the Financial Stability Board in Washington in the past year. The sector holds more than €700 billion of assets, according to data compiled by various reports.

Shadow banking

Regulators are looking at SPVs as they search for potential unregulated risks in shadow banking – a growing area of financial activity that occurs outside the traditional banking sector. The Government moved recently to clamp down on the use of section 110 companies, which are designed to accrue little or no tax, by so-called vulture funds to hold property loans acquired in Ireland during the financial crisis.

In a report published by the IMF this week as part of a review of Ireland’s financial sector, the organisation said it learned during its mission to this country “of instances where individuals were appointed to tens and in some cases hundreds of SPV boards.”

A note towards the end of one of its papers on the asset-management industry in Ireland added: “In related discussions, questions were raised as to the suitability of such appointments. Oversight of governance arrangements for SPVs is currently beyond the purview of the Central Bank.”


One form of SPVs involved in debt securitisation, known as financial vehicle corporations has been obliged to file data on assets and liabilities with the European Central Bank since 2009, given how this sector contributed to the global financial crisis. The Central Bank ordered remaining SPVs in this country to start submitting similar data to it a year ago.

While activities in some of these entities, such as derivative transactions fall under regulation, and many of the sponsors of SPVs are regulated, the vehicles themselves fall outside of regulation.