ACS Framework

The ACS framework consists of both primary and secondary legislation. The original ACS legislation in 2001 was widely regarded as 'best of breed' throughout Europe. The 2007 legislation reinforces the commitment of the financial services sector and government agencies to having a strong legislative framework in place.

The ACS framework has the following key features:

  • Only specialised credit institutions (known in the framework as ‘designated credit institutions’ or DCIs) with a special licence from the Irish Financial Regulator can issue ACS. The business activities of DCIs are restricted to mortgage lending and public sector financing.
  • The Cover-Asset Monitor (CAM) monitors ongoing compliance with the ACS framework. Any breaches must be reported to the Financial Regulator.
  • The CAM must be independent, and is approved by the Financial Regulator.
  • In the event of the insolvency of a DCI the National Treasury Management Agency (NTMA), a State agency, must find someone to manage the pool or to buy the DCI, or run the pool itself if such persons cannot be found.
  • ACS do not accelerate in the event of bankruptcy.
  • There are three types of ACS:
    • public credit
    • mortgage credit
    • commercial mortgage credit
  • Where a DCI issues more than one type of ACS, the assets must be maintained in separate cover pools
  • Assets can be located in the European Economic Area (EEA), Switzerland, Canada, USA, Japan, New Zealand, or Australia.
  • The maximum Loan to Value (LTV) for residential mortgages is 75%, and 60% for commercial mortgages. While mortgages with higher LTVs can be included in cover pools, the amount of the loan in excess of the maximum LTV is not counted for matching purposes. Thus, investors benefit from the excess collateralisation.
  • Residential and commercial mortgages in pools are subject to quarterly valuation assessments by the respective CAM
  • Substitution assets can be included in cover pools, up to 15% of bonds in issue. These are effectively deposits with financial institutions that meet certain eligibility criteria.
  • Mandatory overcollateralisation of 103% for public and mortgage credit ACS; 110% for commercial mortgage ACS.
  • Contractual overcollateralisation is monitored by the CAM and protected by the legislation.

 

The link below gives a more detailed summary of the ACS framework:

 - The ACS Framework (PDF file) [182KB]