Securisation Special Purpose Entities, Bank Sponsors and Derivatives

42 Pages Posted: 5 Nov 2020

See all articles by Pawel Fiedor

Pawel Fiedor

Central Bank of Ireland

Neill Killeen

Central Bank of Ireland

Date Written: July, 2019

Abstract

This paper documents the use of derivatives by securitisation special purpose entities (SPEs), also known as financial vehicle corporations (FVCs), domiciled in Ireland using transaction-level data established by the European Market Infrastructure Regulation. We show that these entities primarily engaged in interest rate derivatives over the period of 2015-2017. We find that larger entities that already engage in international capital markets are more likely to have derivative exposures. We also show that entities sponsored by banks and non-bank financial institutions are relatively more likely to engage in derivative markets. The characteristics of these bank sponsors are important in determining SPEs' engagement in derivative markets. SPEs' heavy reliance on debt finance coupled with their strong interconnectedness with bank sponsors underscores the importance of continuous monitoring and macroprudential surveillance of their derivative activities.

Keywords: derivatives, EMIR, FVCs, market-based finance, shadow banking, SPEs

JEL Classification: F30, F36, G15, G23

Suggested Citation

Fiedor, Pawel and Killeen, Neill, Securisation Special Purpose Entities, Bank Sponsors and Derivatives (July, 2019). ESRB: Working Paper Series No. 2019/99, Available at SSRN: https://ssrn.com/abstract=3723461 or http://dx.doi.org/10.2139/ssrn.3723461

Pawel Fiedor (Contact Author)

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Neill Killeen

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

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