Russian companies outside of the banking sector accounted for more than 60 per cent of the €35.5 billion of assets held in Irish special purpose vehicles (SPVs) used for funding purposes at the end of last year, according to the Central Bank of Ireland.
Assets held in 33 Russian-linked SPVs in the Republic – also known as special purpose entities (SPEs) – account for less than 4 per cent of the total contained in Irish SPVs, as of last September.
“Russian sponsored SPEs predominantly engage in external financing activity where they issue debt from the Irish SPV to raise funds for the parent company,” the Central Bank said in a paper issued on Friday on the Republic’s direct financial links to Russia, as the country has found itself hit by a wave of western sanction in the wake of its attack on Ukraine last week.
Still, the paper noted that the assets and number of Russian sponsored SPE’s have declined since 2016, largely due to a drop in vehicles linked to the country’s banks, as some were unable to issue new debt after the introduction of sanctions in 2014, when Vladimir Putin’s government annexed Crimea.
Fundraising hub
Section 110 of tax laws introduced in 1997 to encourage companies to set up SPVs and make the State a global financing and fundraising hub has turned the country into one of the world’s biggest locations for SPV activities. Lawyers, accountants and bankers are estimated to have generated about €400 million of fees from Irish SPVs in 2020.
The US is the main location globally for such so-called structured finance vehicles used by companies to raise finance from bond markets and privately.
Meanwhile, the Central Bank paper confirmed that there were some €11.4 billion of Russian assets in Irish-domiciled funds at the end of 2021. Ireland is Europe’s second-biggest base for international funds, with more than €4 trillion of assets.
Some €5.07 billion of the Russian assets are bonds issued by Mr Putin’s government, with a further €5.88 billion made up of equities, mainly in companies outside of the financial sector, it said.
Loans
Separately Irish-authorised banks, predominantly overseas-owned lenders, had a combined €1.7 billion exposure financial assets and liabilities to Russian counterparties as of December – equating to 0.1 per cent of the total. Most of the exposure was by way of loans to Russian companies.
Elsewhere, Irish insurance companies held €97 million of shares and bonds issued by Russian entities – or 0.1 per cent of the total. Pension fund data showed holdings of Russian assets of just €7 million, made up mostly of government debt and equity portfolio holdings. Irish households were recorded as owning €1 million of shares in Russian publicly-quoted companies.
