Shining a light on Special Purpose Entities in Ireland

Brian Golden and Patrick Hughes
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Brian Golden: Central Bank of Ireland
Patrick Hughes: Central Bank of Ireland

No 11/EL/18, Economic Letters from Central Bank of Ireland

Abstract: Special Purpose Entities (SPEs) form a substantial component of the Irish-resident financial sector and play an important role in risk dispersion within the global financial system. They are, however, quite complex, spanning a wide range of activities and often forming part of cross-border, multi-entity corporate structures. More generally, market-based credit-intermediation is increasingly supplementing and substituting traditional models of credit, where a company or household borrows directly from a bank which bears the risk of the loan (IMF, 2016). Ireland has emerged as a global hub for this activity, having a non-bank financial sector with total assets of €4.5 trillion in Q1 2018, of which €676 billion were held by SPEs. This paper’s primary purpose is to outline the activities of the SPE sector in Ireland. The insights are primarily gathered from granular data collected by the Central Bank of Ireland (hereafter the Central Bank), which covers each SPE‘s balance sheet, mostly at individual security level, its activity type and links to other entities, among other information.3 We provide a broad overview of the sector, detail elements of interconnectedness to other financial entities, highlight some common business models and discuss the impact on the Irish economy.

Date: 2018-12
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