Bank of Ireland Group plc – Capital Developments
28 November 2017 – The Group has executed a credit risk transfer transaction which will increase the Group’s transitional CET1 ratio by c.50bps and the Group’s fully loaded CET1 ratio by c.45bps.
The transaction references a portfolio of c.$1.7 billion of loan assets originated by the Group’s Leveraged Acquisition Finance business and involves the execution of a credit default swap backed by c.$205 million of credit linked notes issued by Mespil Securities DAC to a group of international investors.
The transaction reduces the Group’s credit risk exposure, and consequently the risk weighted assets on the reference portfolio of loan assets, through a risk sharing structure whereby the buyers of the notes assume the credit risk for c.$205 million of potential credit losses on the reference portfolio of loan assets in return for an initial annual coupon of c.$24 million. The transaction will reduce the Group’s net interest margin by c.2bps. No assets will be derecognised from the Group’s balance sheet and the reference portfolio of loan assets and related customer relationships will continue to be maintained by the Group.
ECB’s Targeted Review of Internal Models (TRIM) – Irish Mortgages
As part of the TRIM process, the Group is continuing to engage with the ECB in respect of the regulatory capital requirements for its Irish mortgage portfolio. While this process remains ongoing, adjustments may be required to the Group’s capital requirements for Irish mortgages which could absorb the capital benefits of the credit risk transfer transaction in part or in full.