“section 110”companies is likelyto grow in future years to include other capital assets such
as wind farms.
The European Central Bank (ECB,2008)deﬁnesan FVC as a ﬁrm that “intends to carry
out, or carries out, one or more securitisation transactions and is insulated from the risk of
bankruptcy or any other default of the originator”.For this reason, FVCs in Ireland are often
described as “bankruptcy remote vehicles”. The Financial Stability Board (2015, p. 51)
deﬁnes FVCs as “bankruptcy remote securitisation vehicles funded through the issue of
Developing the securitisation industry is a long-established policy of the Irish State
(Department of An Taoiseach, 2000, p. 11). Favourable tax provisions to encourage
securitisation were ﬁrst introduced in 1991 but limited to those ﬁrms located at the Irish
Financial Services Centre, Dublin (IFSC) (Godfrey et al.,2015,p.49).“Section 110”of the
Taxes Consolidation Act 1997 conferred these advantages on all FVCs (including those
located outside the IFSC).
Most FVCs act as ﬁnancial inter mediaries –that is, they buy and sell various types of
ﬁnancial assets. Althoughsome ﬁrms classiﬁed as an FVC by the Central Bank of Ireland
(CBI) are not ﬁnancial intermediaries, but rather have been used to raise funds to purchase
distressed assets, on behalfof ﬁrms such as Cerebus, Lone Star Capital, and Blackstone. The
range of activities undertaken by ﬁrms that may beneﬁt from “section 110”has been
substantially extended since 1997. This means that many SPVs availing this incentive are
not classiﬁed as FVCs in ECB statistics.
All FVCs and ﬁrms established using “section110”in Ireland, are incorporated under the
companies Acts and are required to ﬁle documents, including company accounts, in
Companies RegistrationOfﬁce (CRO) in Ireland. This paper used data published by the ECB
to identify individual FVCs and thus to access accounts. In addition, SPVs, sometimes
referred to as special purpose entities (SPEs), established using “section 110”provisions
were also identiﬁed insearches of CRO and Irish Stock Exchange (ISE) ﬁlings.
The vast majority of FVCs in Ireland are owned by a charitable trust (described as
an “orphan”structure) have no subsidiaries, ﬁxed assets or employees. However, in
some cases, the accounts may be consolidated into a banking group. Even though they
may be large with over e1bn in gross assets and have large gross income, they pay very
little in corporate tax.
“Section 110”SPVs engaged in activities, described as fulﬁlling “narrow, speciﬁc
purposes”, were also required to report to the CBI since 2015 (Barrett et al., 2016a,2016b,
p.1). As shown later, “section 110”SPVs connected to Russian ﬁrms, all acted as an
intermediary in raisingdebt which was used to provide a loan to a speciﬁc Russian ﬁrm. As
in the case of FVCs, securitisation may also be the primary function of “section 110”SPVs.
Hence, it may be difﬁcult in practice to distinguishbetween those ﬁrms classiﬁed as an FVC
compared to a “section 110”SPV.
The paper shows that despite the ECB prescription that they should be “insulated from
the risks of bankruptcy”, many of the banks thatincurred large losses in Ireland, the UK and
Germany, in the ﬁnancial crash,were found to be connected to FVCs incorporated in Ireland,
organised as “section 110”ﬁrms. This pattern is repeated more recently in relation to SPVs
connected with Russian Banks. Very few of these SPVs is classiﬁed as FVCs (in CBI/ECB
data up to 2015).
The paper argues that the data published by the CBI/ECB on the populationof FVCs in
Ireland and more recently SPVs appears inconsistent with the total number of SPVs
authorised by the revenue in Ireland. Furthermore,the CBI/ECB data appears to omit many