Lawyers, bankers and accountants shared €400m in fees from SPVs in 2020
Irish-resident special purpose vehicles held almost €896bn of assets as of last December
A view from the IFSC in Dublin. File photograph: iStock
Lawyers, accountants and bankers generated about €400 million of fees from Irish special purpose vehicles in 2020, following a sharp increase in the number of the latter entities in recent years, according to industry sources.
The Central Bank said three years ago ultra-tax-efficient Irish special purpose vehicles (SPVs) paid out €284 million to service providers in Dublin’s International Financial Services Centre (IFSC) and overseas in 2017.
However, industry sources say that the almost 40 per cent increase in the number of such SPV entities in the Republic since then drove such fees up to about €400 million last year. A spokeswoman for the regulator declined to comment.
Section 110 of tax laws introduced in 1997 to encourage companies to set up SPVs and make the State a global financing and fundraising hub has turned the country into one of the world’s biggest locations for SPV activities. The US is the main location for such so-called structured finance vehicles used by companies to raise finance from bond markets and privately.
They allow for assets to be ringfenced in tax-efficient entities to provide collateral to raise funding in the market.
The number of Irish-resident SPVs rose by 249 to 2,862 last year, with such entities left holding almost €896 billion of assets as of December.
Much of the growth last year came from Greek banks using Irish vehicles to shift problem loans off their balance sheets. Irish SPVs were used to structure the refinancing of mortgage, consumer and corporate debt on international public bond markets, in a process known as loan securitisation, and in off-market transactions.
Greek banks have put more than €50 billion of Greek assets into Irish-domiciled SPVs in recent years.
Last year also saw pools of corporate loans, known as collateralised loan obligations (CLOs), move from the Netherlands to Ireland in response to a change in Dutch VAT rules. Some 79 CLOs, amounting to €31.4 billion in total assets, transferred to Dublin as a result.
While SPVs are not directly regulated, authorities in the Republic and elsewhere have moved in the wake of the financial crisis to collect data on them to monitor for potential risks they may pose to the global system.