DOCUMENTATION ON MONETARY POLICY INSTRUMENTS AND PROCEDURES

Transcription

1 26 May 2014 DOCUMENTATION ON MONETARY POLICY INSTRUMENTS AND PROCEDURES

2 Enquiries should be addressed to: Financial Markets Division PO Box 559 Dame Street Dublin 2 Telephone: Fax: fmdadmin@centralbank.ie Member of the European System of Central Banks

3 Table of Contents INTRODUCTION... 5 CHAPTER 1: MONETARY POLICY IMPLEMENTATION FRAMEWORK Overview Eurosystem Monetary Policy Instruments... 7 Table 1: Eurosystem Monetary Policy Operations The Counterparties CHAPTER 2: ELIGIBILITY CRITERIA FOR COUNTERPARTIES Eligibility Criteria for Monetary Policy Operations Procedures and Sanctions to be Applied in the Event of Non-Compliance with Counterparty Obligations Events of Default Possible measures on the Grounds of Prudence or following an Event of Default CHAPTER 3: OPEN MARKET OPERATIONS Main Refinancing Operations Longer-Term Refinancing Operations Fine-Tuning Operations Structural Operations Box 1: Issuance of ECB Debt Certificates CHAPTER 4: STANDING FACILITIES The Marginal Lending Facility The Deposit Facility CHAPTER 5: ELIGIBLE ASSETS General Considerations Eligibility Specifications for Underlying Assets Terms and Conditions for Non-marketable Assets Documentation on Monetary Policy Instruments and Procedures 2014 i

4 5.4 Rules for the Use of Eligible Assets Table 2: Eligible assets for Eurosystem monetary policy operations Eurosystem Credit Assessment Framework Box 2: Implicit credit assessments for euro area regional government, local authority and public sector entity issuers, debtors or guarantors without an ECAI credit assessment Risk Control Measures Box 3: Risk control measures Box 4: Liquidity categories for marketable assets Box 5: Levels of valuation haircuts applied to eligible marketable assets (%) Box 6: Calculation of margin calls Box 7: Levels of valuation haircuts applied to credit claims with fixed interest payments (%) Valuation Principles for Underlying Assets Cross-border Use of Eligible Assets Chart 1: The correspondent central banking model Chart 2: Links between securities settlement systems Chart 3: The correspondent central banking model with links Chart 4: Cross-border triparty services Acceptance of Non-euro Denominated Collateral in Contingencies CHAPTER 6: TENDER PROCEDURES General Considerations Box 8: Operational Steps for Tender Procedures Tender Operations Calendar Box 9: Normal Trade Days for the Main and the Longer-Term Refinancing Operations Announcement of Tender Operations Counterparties Preparation and Submission of Tender Bids Tender Allotment Procedures ii

5 6.6 Announcement of Tender Results Procedures for Bilateral Operations CHAPTER 7: SETTLEMENT PROCEDURES General Considerations Settlement of Open Market Operations Box 10: Normal Settlement Dates for Eurosystem Open Market Operations End-of-Day Procedures CHAPTER 8: MINIMUM RESERVES General Considerations Institutions Subject to Minimum Reserve Requirements Determination of Minimum Reserves Box 11: Reserve Base and Reserve Ratios Maintenance of Reserve Holdings Box 12: Calculation of the Remuneration of Holdings of Required Reserves Reporting, Acknowledgement and Verification of the Reserve Base Non-Compliance with Minimum Reserve Obligations CHAPTER 9: ADDITIONAL LEGAL AGREEMENTS Framework Agreement in respect of Eurosystem Operations secured over Collateral Pool Assets Framework Agreement in respect of Mortgage-Backed Promissory Notes Master Substitution Agreement in respect of Eurosystem Operations ANNEX 1 PRO FORMA PROCEDURES ANNEX 2 GLOSSARY OF TERMS ANNEX 3 EXAMPLES OF MONETARY POLICY OPERATIONS AND PROCEDURES ANNEX 4 SELECTION OF COUNTERPARTIES FOR FOREIGN EXCHANGE INTERVENTION OPERATIONS AND TERMS AND CONDITIONS FOR FOREIGN EXCHANGE SWAPS FOR MONETARY POLICY PURPOSES Documentation on Monetary Policy Instruments and Procedures 2014 iii

6 ANNEX 5 REPORTING FRAMEWORK FOR THE MONEY AND BANKING STATISTICS OF THE EUROPEAN CENTRAL BANK ANNEX 6 GETTING STARTED-PROCEDURES APPLICABLE TO CREDIT CLAIMS ANNEX 7 PRO FORMA APPLICATION LETTER FOR INTERNAL RATING BASED SYSTEMS ANNEX 8 ADDITIONAL TERMS AND CONDITIONS WHEN USING CREDIT CLAIMS ON A CROSS- BORDER BASIS ANNEX 9 LOAN-LEVEL DATA REPORTING REQUIREMENTS FOR ASSET-BACKED SECURITIES ANNEX 10 THE EUROSYSTEM WEBSITES iv

7 DOCUMENTATION ON MONETARY POLICY INSTRUMENTS AND PROCEDURES INTRODUCTION This Document contains the terms and conditions applicable to counterparties for monetary policy operations with the (the Bank ), as may be amended, varied or supplemented from time to time, including specific legal agreements relating to the mobilisation of collateral. This Document should be read in conjunction with the supplement on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral, issued by the Bank on 14 September 2012, as amended from time to time, and published on the Bank s website 1. Chapter 1 provides, for information purposes only, a brief overview of the operational framework for the monetary policy of the Eurosystem 2, describing the main operational features such as the open market operations, standing facilities and minimum reserves. Chapters 2, 3, 4 and 5 set out the general terms and conditions for monetary policy operations: Chapter 2 specifies the general eligibility criteria for monetary policy counterparties; Chapter 3 describes the Eurosystem s open market operations; Chapter 4 presents the standing facilities available to counterparties and in Chapter 5, the eligibility criteria for underlying assets in the execution of monetary policy operations are defined. The tender and settlement procedures for monetary policy operations are set out in Chapters 6 and 7. Chapter 8 provides information on the Eurosystem s minimum reserve system. Decisions on the implementation of minimum reserves lie within the competence of the ECB and any information contained in Chapter 8 is purely descriptive and does not purport to confer any rights or impose any obligations on counterparties. The legal agreements that counterparties must sign for certain monetary policy operations are contained in Chapter 9. These include the framework agreement in respect of Eurosystem Operations secured over collateral pool assets, the framework agreement in respect of Mortgage-Backed Promissory Notes (MBPNs) (together, The Governing Council of the European Central Bank, in accordance with Article 282(1) of the Treaty on the Functioning of the European Union, uses the term Eurosystem to denote those components of the European System of Central Banks that carry out its basic tasks, i.e. the European Central Bank and the national central banks of those Member States which have adopted the single currency in accordance with the Treaty on the Functioning of the European Union.

8 the Framework Agreements) and the master substitution agreement in respect of Eurosystem Operations. This Document is based on and compiled in conformity with the contents of The Implementation of Monetary Policy in the Euro Area: General Documentation on Eurosystem Monetary Policy Instruments and Procedures (General Documentation) attached as Annex 1 to the Guideline of the European Central Bank of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem (recast) (ECB/2011/14), as amended. In particular, this Document complies with the required characteristics laid down in the arrangements established between members of the Eurosystem, which are designed to ensure a uniform implementation of the monetary policy framework. The instruments, conditions, criteria or procedures (including the Framework Agreements) for the execution of credit operations by the Eurosystem may be amended at any time. The Bank will give counterparties as much notice as possible of such amendments and counterparties are required to stipulate a contact point for the receipt of such notices from the Bank. Counterparties should also take note of legally binding Decisions adopted by the Governing Council of the ECB and press releases on the ECB website for general updates on changes to instruments, conditions, criteria or procedures in relation to Eurosystem credit operations. The relationship established by this Document shall be governed by and construed in accordance with the laws of Ireland. 6

9 CHAPTER 1: MONETARY POLICY IMPLEMENTATION FRAMEWORK 1.1 Overview The European System of Central Banks (ESCB) consists of the European Central Bank (ECB) and the national central banks of the EU Member States. 3 The activities of the ESCB are carried out in accordance with the Treaty on the Functioning of the European Union (hereinafter the Treaty) and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the Statute of the ESCB ). The ESCB is governed by the decision-making bodies of the ECB. In this respect, the Governing Council of the ECB is responsible for the formulation of monetary policy, while the Executive Board is empowered to implement monetary policy according to the decisions made and guidelines laid down by the Governing Council. To the extent deemed possible and appropriate and with a view to ensuring operational efficiency, the ECB has recourse to the NCBs 4 for carrying out the operations which form part of the tasks of the Eurosystem. The NCBs may, if necessary for the implementation of monetary policy, share amongst the Eurosystem members individual information, such as operational data, related to counterparties participating in Eurosystem operations. 5 The Eurosystem s monetary policy operations are executed under uniform terms and conditions in all Member states Eurosystem Monetary Policy Instruments In order to achieve its objectives, the Eurosystem has at its disposal a set of monetary policy instruments; the Eurosystem conducts open market operations, offers standing facilities and requires credit institutions to hold minimum reserves on accounts with the Eurosystem. Open market operations Open market operations play an important role in the monetary policy of the Eurosystem for the purposes of steering interest rates, managing the liquidity situation in the market and signalling the stance of monetary policy. Five types of instruments are available to the Eurosystem for the conduct of open market operations. The most important instrument is the reverse transaction (applicable on the basis of repurchase agreements or collateralised loans). The Eurosystem may also use outright transactions, the issuance of debt certificates, foreign exchange swaps and the collection of fixed-term deposits. Open market operations are initiated by the ECB, which also decides on the instrument to be used and on the terms and 3 It should be noted that the national central banks of those EU Member States whose currency is not the euro retain their powers in the field of monetary policy according to national law and are thus not involved in the conduct of the single monetary policy. 4 Throughout this document, the term NCBs refers to the national central banks of the Member States whose currency is the euro. 5 Such information is subject to the requirement concerning professional secrecy set out in Article 37 of the Statute of the ESCB. 6 Throughout this document, the term Member State refers to a Member State whose currency is the euro.

10 conditions for its execution. They can be executed on the basis of standard tenders, quick tenders or bilateral procedures. 7 With regard to their aims, regularity and procedures, the Eurosystem s open market operations can be divided into the following four categories (see also Table 1): The main refinancing operations are regular liquidity-providing reverse transactions with a weekly frequency and a maturity of normally one week. These operations are executed by the NCBs on the basis of standard tenders. The main refinancing operations play a pivotal role in pursuing the purposes of the Eurosystem s open market operations. The longer-term refinancing operations are liquidity-providing reverse transactions with a monthly frequency and a maturity of normally three months. These operations are aimed at providing counterparties with additional longer-term refinancing and are executed by the NCBs on the basis of standard tenders. In these operations, the Eurosystem does not, as a rule, intend to send signals to the market and therefore normally acts as a rate-taker. Fine-tuning operations are executed on an ad hoc basis with the aim of managing the liquidity situation in the market and steering interest rates, in particular in order to smooth the effects on interest rates caused by unexpected liquidity fluctuations in the market. Fine-tuning operations may be conducted on the last day of a reserve maintenance period to counter liquidity imbalances, which may have accumulated since the allotment of the last main refinancing operation. Finetuning operations are primarily executed as reverse transactions, but may also take the form of either foreign exchange swaps or the collection of fixed-term deposits. The instruments and procedures applied in the conduct of fine-tuning operations are adapted to the types of transactions and the specific objectives pursued in the operations. Fine-tuning operations are normally executed by the NCBs through quick tenders or bilateral procedures. The Governing Council of the ECB can decide that, under exceptional circumstances, fine-tuning bilateral operations may be carried out by the ECB itself. In addition, the Eurosystem may carry out structural operations through the issuance of ECB debt certificates, reverse transactions and outright transactions. These operations are executed whenever the ECB wishes to adjust the structural position of the Eurosystem vis-à-vis the financial sector (on a regular or non-regular basis). Structural operations in the form of reverse transactions and the issuance of 7 The different procedures for the execution of Eurosystem open market operations, i.e. standard tenders, quick tenders and bilateral procedures, are specified in Chapter 6. For standard tenders, a maximum of 24 hours elapses between the tender announcement and the certification of the allotment result. All counterparties fulfilling the general eligibility criteria specified in Section 2.1 may participate in standard tenders. Quick tenders are normally executed within a time frame of 90 minutes. The Eurosystem may select a limited number of counterparties to participate in quick tenders. The term bilateral procedures refers to any case in which the Eurosystem conducts a transaction with one or a few counterparties without using tender procedures. Bilateral procedures include operations executed through stock exchanges or market agents. 8

11 debt instruments are carried out by the NCBs through standard tenders. Structural operations in the form of outright transactions are normally executed by the NCBs through bilateral procedures. The Governing Council of the ECB can decide that, under exceptional circumstances, structural operations may be executed by the ECB itself. Standing Facilities Standing facilities are aimed at providing and absorbing overnight liquidity, signal the general stance of monetary policy and bound overnight market interest rates. Two standing facilities are available to eligible counterparties on their own initiative, subject to their fulfilment of certain operational access conditions: Counterparties can use the marginal lending facility to obtain overnight liquidity from the NCBs against eligible assets. Under normal circumstances, there are no credit limits or other restrictions on counterparties access to the facility apart from the requirement to present sufficient underlying assets. The interest rate on the marginal lending facility normally provides a ceiling for the overnight market interest rate. Counterparties can use the deposit facility to make overnight deposits with the national central banks. Under normal circumstances, there are no deposit limits or other restrictions on counterparties access to the facility. The interest rate on the deposit facility normally provides a floor for the overnight market interest rate. The standing facilities are administered in a decentralised manner by the NCBs. Minimum Reserves The Eurosystem s minimum reserve system applies to credit institutions in the euro area and primarily pursues the aims of stabilising money market interest rates and creating (or enlarging) a structural liquidity shortage. The reserve requirement of each institution is determined in relation to elements of its balance sheet. In order to pursue the aim of stabilising interest rates, the Eurosystem s minimum reserve system enables institutions to make use of averaging provisions. Compliance with the reserve requirement is determined on the basis of the institutions average daily reserve holdings over the maintenance period. Institutions holdings of required reserves are remunerated at the weighted average rate on the Eurosystem s main refinancing operations within the respective maintenance period.

12 Table 1: Eurosystem Monetary Policy Operations Monetary policy operations Open market operations Types of transactions Maturity Frequency Procedure Provision of liquidity Absorption of liquidity Main refinancing operations Longer-term refinancing operations Fine-tuning operations Structural operations Standing facilities Reverse transactions Reverse transactions Reverse transactions Foreign exchange swaps Reverse transactions Outright purchases - One week Weekly Standard tenders - Three months Monthly Standard tenders Reverse transactions Collection of fixed-term deposits Foreign exchange swaps Issuance of ECB debt certificates Nonstandardised Standardised/ nonstandardised Non-regular Regular and non-regular Quick tenders Bilateral procedures Standard tenders Outright sales - Non-regular Bilateral procedures Marginal lending facility Reverse transactions - Overnight Access at the discretion of counterparties Deposit facility - Deposits Overnight Access at the discretion of counterparties 1.3 The Counterparties The Eurosystem s monetary policy framework is formulated with a view to ensuring the participation of a broad range of counterparties. Institutions subject to minimum reserve requirements according to Article 19.1 of the Statute of the ESCB may access the standing facilities and participate in open market operations based on standard tenders as well as outright transactions. The Eurosystem may select a limited number of counterparties to participate in fine-tuning operations. For foreign exchange swaps conducted for monetary policy purposes, active players in the foreign exchange market are used. The set of counterparties for these operations is limited to those institutions selected for Eurosystem foreign exchange intervention operations which are established in the euro area. Counterparties shall be deemed to be aware of, and shall comply with, all obligations imposed on them by anti-money laundering and counter-terrorist financing legislation. 10

13 CHAPTER 2: ELIGIBILITY CRITERIA FOR COUNTERPARTIES 2.1 Eligibility Criteria for Monetary Policy Operations General Eligibility Counterparties to monetary policy operations must fulfil the following eligibility criteria: i) only institutions subject to the Eurosystem minimum reserve system according to Article 19.1 of the Statute of the ESCB are eligible to be counterparties; institutions which are exempt from their obligations under the Eurosystem s minimum reserve system (see Chapter 8.2) are not eligible to be counterparties to Eurosystem standing facilities and open market operations; ii) iii) iv) counterparties must be financially sound; they should be subject to at least one form of EU/EEA harmonised supervision by national authorities. 8 In view of their specific institutional nature under Community law, financially sound institutions within the meaning of Article 123(2) of the Treaty that are subject to supervision of a standard comparable to supervision by competent national authorities can be accepted as counterparties. Financially sound institutions that are subject to nonharmonised supervision by national authorities of a standard comparable to harmonised EU/EEA supervision can also be accepted as counterparties, e.g. branches established in the euro area of institutions that have their head office outside the EEA; counterparties must have direct membership of the TARGET2 system or have an arrangement with an institution that is a participant in the TARGET2 system to conduct transactions with the Bank; counterparties, for the purpose of entering into any transaction, must fulfil any legal requirements specified by the Bank (see Chapter 9); v) counterparties must carry out monetary policy operations with the Bank as principals. Eligible institutions incorporated in Ireland may access the Bank s standing facilities and participate in open market operations based on standard tenders 9 ; vi) counterparties must fulfil other specified criteria as communicated by the Bank from time to time. 8 Harmonised supervision of credit institutions is based on Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (OJ L 177, , p. 1). 9 An institution may access the Eurosystem s standing facilities and open market operations based on standard tenders through the NCB of the Member State in which it is incorporated. If an institution has establishments (its head office or branches) in more than one Member State, each establishment has access to these operations through the NCB of the Member State in which it is established, notwithstanding the fact that the bids of an institution may only be submitted by one establishment (either the head office or a designated branch) in each Member State.

14 Criteria for Selection of Counterparties for Quick Tenders and Bilateral Operations For outright transactions, no restrictions are placed a priori on the range of counterparties. For foreign exchange swaps executed for monetary policy purposes, counterparties must be able to conduct large-volume foreign exchange operations efficiently under all market conditions. The range of counterparties to foreign exchange swaps corresponds to the counterparties established in the euro area, which are selected for Eurosystem foreign exchange intervention operations. The criteria and procedures applied to the selection of counterparties (set out in Annex 4) are based on two sets of criteria. The first relates to the principle of prudence. Under prudence, there are three criteria: counterparties must (i) be creditworthy (taking into account credit ratings available from commercial agencies and counterparties capital and other business ratios); (ii) be subject to supervision by the Bank; and (iii) follow high ethical standards. The second set of criteria is concerned with efficiency considerations. This relates to the requirement that counterparties must be competitive in their pricing behaviour and be able to handle large volume transactions (see Annex 4). For other operations based on quick tenders and bilateral procedures (fine-tuning reverse transactions and the collection of fixed-term deposits), the Bank will select a set of counterparties that fulfil the general counterparty eligibility criteria. In this respect, activity in the money market is the prime selection criterion. Other criteria which might be taken into account are, for example, the efficiency of the trading desk and bidding potential. In quick tenders and bilateral operations, the Bank will deal with the counterparties that are included in its set of fine-tuning counterparties. Quick tenders and bilateral operations may also be executed with a broader range of counterparties. If, for operational reasons, the Bank cannot deal in each operation with all its fine-tuning counterparties, the selection of counterparties will be based on a rotation scheme in order to ensure equitable access. Business Day and Legal Aspects Business days for monetary policy purposes are any days on which the Bank is open for the purpose of conducting Eurosystem monetary policy operations ( Irish Business Days ). This will be any day other than Saturdays, Sundays, New Year s Day, Good Friday, Easter Monday, 1 May, Christmas Day and 26 December and any other days as notified from time to time. Eurosystem Business Days are any days on which the ECB and at least one national central bank are open for the purpose of conducting Eurosystem monetary policy operations. Counterparties cannot assign their interests or otherwise affect their legal status without the prior written consent of the Bank. 12

15 2.2 Procedures and Sanctions to be Applied in the Event of Non-Compliance with Counterparty Obligations 10 The ECB shall impose sanctions on counterparties, or suspend counterparties access to open market operations, if counterparties fail to comply with their obligations under the terms and conditions of this Documentation. In accordance with the provisions of the contractual or regulatory arrangements applied by the Bank (or by the ECB), the Eurosystem can and will impose financial penalties on counterparties, or suspend counterparties participation in open market operations, if counterparties fail to comply with their obligations under the contractual or regulatory arrangements applied by the Bank (or by the ECB) as set out below. This relates to cases of infringement of (a) tender rules, if a counterparty fails to transfer a sufficient amount of underlying assets or cash 11 to settle (at the settlement day), or to collateralise, until the maturity of the operation by means of corresponding margin calls, the amount of liquidity it has been allotted in a liquidity-providing operation, or if it fails to transfer a sufficient amount of cash to settle the amount it has been allotted in a liquidityabsorbing operation; and (b) bilateral transaction rules, if a counterparty fails to transfer a sufficient amount of eligible underlying assets, or if it fails to transfer a sufficient amount of cash to settle the amount agreed in bilateral transactions, or if it fails to collateralise an outstanding bilateral transaction at any time until its maturity by means of corresponding margin calls. This also applies to cases of non-compliance by a counterparty with the rules for the use of underlying assets (if a counterparty is using assets which are or have become ineligible, or which may not be used by the counterparty, e.g. owing to close links between, or the identity of, issuer/guarantor and counterparty), and to non-compliance with the rules for end-of-day procedures and access conditions for the marginal lending facility (if a counterparty which has a negative balance on the settlement account at the end of the day does not fulfil the access conditions for the marginal lending facility). In addition, a suspension measure taken vis-à-vis a non-complying counterparty may be applied to branches of the same institution established in other Member States. Where, as an exceptional measure, this is required on account of the seriousness of a case of noncompliance, as evidenced by its frequency or duration, for instance, a counterparty may be suspended from all future monetary policy operations for a certain period of time. Financial penalties imposed by the Bank in the event of non-compliance in relation to a breach of the rules concerning tender operations, bilateral transactions, underlying assets, end-of-day procedures or the access conditions to the marginal lending facility are calculated at a prespecified penalty rate (as set out in and below). 10 For cases of non-compliance with reserve requirements see Chapter When applicable, as regards margin calls.

16 2.2.1 Financial Penalties If a counterparty infringes the rules on tender operations 12, bilateral transactions 13, the use of underlying assets 14, end-of-day procedures or access conditions for the marginal lending facility 15, the Bank shall apply financial penalties as follows: (a) For infringements of rules related to tender operations, bilateral transactions and the use of underlying assets, for the first and for the second infringements that occur within a 12-month period a financial penalty shall be applied to each infringement. The financial penalties are calculated using the marginal lending rate that applied when the infringement began plus 2.5 percentage points. (i) For infringements of rules related to tender operations and bilateral transactions, the financial penalties are calculated on the basis of the amount of collateral or cash that the counterparty could not settle, multiplied by the coefficient X/360, where X is the number of calendar days, with a maximum of seven, during which the counterparty was unable to collateralise or supply the allotted amount during the maturity of an operation. A flat penalty of 500 applies where the calculation results in an amount of less than 500; and (ii) For infringements of rules related to the use of underlying assets 16, the financial penalties are calculated on the basis of the amount of ineligible assets, or assets that may not be used by the counterparty, which are either: provided by the counterparty to the Bank, or the ECB or not removed by the counterparty by or before the start of the eighth calendar day following an event after which the eligible assets become ineligible or may no longer be used by the counterparty, multiplied by 12 This applies if a counterparty fails to transfer a sufficient amount of underlying assets or cash (when applicable, as regards margin calls) to settle on the settlement day, or to collateralise, until the maturity of the operation by means of corresponding margin calls, the amount of liquidity it has been allotted in a liquidity-providing operation, or if it fails to transfer a sufficient amount of cash to settle the amount it has been allotted in a liquidity-absorbing operation. 13 This applies if a counterparty fails to transfer a sufficient amount of eligible underlying assets or if it fails to transfer a sufficient amount of cash to settle the amount agreed in bilateral transactions, or if it fails to collateralise an outstanding bilateral transaction at any time until its maturity by means of corresponding margin calls. 14 This applies if a counterparty is using assets that are or have become ineligible or that may not be used by the counterparty, e.g., owing to close links between, or the identity of, the issuer/guarantor and the counterparty. 15 This applies if a counterparty has a negative balance on the settlement account at the end of the day and does not fulfil the access conditions for the marginal lending facility. 16 The following provisions also apply where: (a) the counterparty has been using ineligible assets or has provided information affecting the collateral value negatively, e.g on the outstanding amount of a used credit claim that is or has been false or out of date; or (b) the counterparty is using assets which are ineligible owing to close links between the issuer/guarantor and the counterparty. 14

17 the coefficient X/360. Where X is the number of calendar days, with a maximum of seven, during which the counterparty was in breach of the rules relating to the use of underlying assets. A flat penalty of 500 applies where the calculation results in an amount less than 500. (b) The first time the rules for end-of-day procedures or for access to the marginal lending facility are infringed, the applicable financial penalties are calculated using the marginal lending rate that applied when the infringement began plus 5 percentage points. For repeated infringements, the penalty interest rate increases by a further 2.5 percentage points each time this occurs within a 12-month period, calculated on the basis of the amount of the unauthorised access to the marginal lending facility. A flat penalty of 500 applies where the calculation results in an amount less than 500. Examples of the calculation of financial penalties are set out below: Counterparties Non-Compliance with the Rules related to Eurosystem Open Market Operations In a liquidity-providing operation, counterparty X is unable to transfer a sufficient amount of underlying assets to settle the amount of liquidity that it has been allotted in a tender operation or that has been agreed in a bilateral transaction. Counterparty X has been allotted 81 million in the tender operation of a main refinancing operation (maturity of one week), but can only transfer underlying assets with a value, after application of the relevant valuation haircuts, of million (instead of 81 million); the marginal lending rate is 4.5%. Solution: counterparty X is subject to a financial penalty of: ,000,000 76,950,000 = 5, Counterparties Non-Compliance with Rules for the Use of Underlying Assets A check by the Bank reveals that counterparty X has delivered underlying assets that are issued by an entity with which it has close links. The assets have a value of 27 million. 18 The marginal lending rate is 4.5%. Solution: counterparty X is subject to a financial penalty of: ,000,000 = 5, Financial penalties shall be rounded up or down to the nearest cent. 18 For those assets which are marketable, this value is the market value; for those assets which are nonmarketable, the same value as the one applied for monetary policy operations after calculating the risk control measures (haircuts) shall be applied.

18 Non-compliance with the Rules for End-of-Day Procedures and the Conditions for Access to the Marginal Lending Facility The penalty formula to be applied to these cases of non-compliance shall be based on the negative balance at the end of the day. Counterparty X is in principle eligible for monetary policy operations, but has been suspended or excluded from access to the marginal lending facility. The credit institution has a negative balance of 27 million at the end of the day and the marginal lending rate is 4.5% and the additional rate, in line with the TARGET2 Guideline, is 5%. Solution: counterparty X is subject, in addition to the cost of access to the marginal lending facility, to a financial penalty of: ,000,000 = 3, Non-Financial Penalties The Bank shall suspend a counterparty for infringements of rules related to tender operations and bilateral transactions and of rules for underlying assets as set out below: a) Suspension after infringements of rules related to tender operations and bilateral transactions If a third infringement of the same type occurs within a 12-month period, the Bank shall suspend counterparties from the subsequent open market operation(s) of the same type and executed under the same procedures to be initiated during a certain period in addition to a financial penalty calculated in accordance with the rules outlined in Section The suspension shall be applied in accordance with the following scale: i) if the amount of non-delivered collateral or cash is up to 40 percent of the total collateral or cash to be delivered on the occasion of the third infringement, a suspension of one month shall be applied; ii) if the amount of non-delivered collateral or cash is between 40 percent and 80 percent of the total collateral or cash to be delivered on the occasion of the third infringement, a suspension of two months shall be applied; and iii) if the amount of non-delivered collateral or cash is between 80 percent and 100 percent of the total collateral or cash to be delivered on the occasion of the third infringement, a suspension of three months shall be applied. These financial penalties and suspension measures shall also apply, without prejudice to subsection (c) below, to any other successive infringement during each 12-month period. 16

19 b) Suspension after infringements of rules for underlying assets If a third infringement occurs within a 12-month period, the Bank shall suspend the counterparty from the subsequent open market operation in addition to imposing a financial penalty calculated in accordance with Section These financial penalties and suspension measures shall also apply, without prejudice to subsection c) below, to any other successive infringement during each 12-month period. c) Suspension from access to all future monetary policy operations for a certain period in exceptional cases In exceptional cases where required on account of the seriousness of the case(s) of noncompliance, and taking into account in particular the amounts involved, the frequency or the duration of the cases of non-compliance, consideration will be given, in addition to imposing a financial penalty calculated in accordance with Section 2.2.1, to the suspension of a counterparty from access to all future monetary policy operations for a period of three months. d) Institutions located in other Member States The Eurosystem may also decide whether the suspension measure proposed to be taken vis-àvis the non-compliant counterparty should also apply to branches of the same institution established in other Member States. In determining whether to exercise the right to impose financial or non-financial penalties, the Bank shall take into consideration the circumstances of each specific case, including the reasons for non-compliance provided by the counterparty. In doing so the Bank will, in exceptional cases only, with the approval of the ECB, either fully or partially waive the right to impose such measures. In cases of unforeseeable events, or events beyond the control of counterparties, these measures shall be waived. 2.3 Events of Default If any of the events, or any combination of the events set out in (a) to (x) below, occur in relation to the counterparty, an event of default shall be considered to have occurred: (a) any representation or warranty made or deemed to be made or repeated by the counterparty under this Documentation in the context of any specific operation or transaction or under any applicable law was or is incorrect in any material respect when made or deemed to be made or repeated; or (b) the counterparty defaults in the due and punctual performance of any of the other provisions of this Documentation or in the context of any specific operation or transaction and (if, in the Bank's determination, capable of remedy) fails to remedy such default within such period as the Bank may designate (not to exceed 30 days) after notice is given by the Bank requiring such default to be remedied and designating the time period for remedy thereof; or

20 (c) the counterparty ceases or threatens to cease to carry on its business or any substantial part thereof; or (d) a decision is made by a competent judicial or other authority to implement in relation to the counterparty or any of its subsidiaries a procedure for the windingup of or the appointment of a liquidator or analogous officer over the counterparty or any such subsidiary as the case may be or any other analogous procedure; or (e) a decision is made by a competent judicial or other authority to implement a reorganisation measure or other analogous procedure intended to safeguard or restore the financial situation of, and to avoid the making of a decision of the kind referred to in (d) above in relation to, the counterparty or any of its subsidiaries; or (f) a petition is presented for the appointment of an examiner pursuant to Section 2 of the Companies (Amendment) Act, 1990, as amended, in relation to the counterparty or any of its subsidiaries or an examiner is appointed to the counterparty or any of its subsidiaries; or (g) a petition (not being a petition falling within (f) above or a procedural step falling within (j) below) is filed or presented in respect of the counterparty or any of its subsidiaries (other than by the Bank in respect of any obligation under this Documentation) in any court or before any agency alleging or for the bankruptcy, winding-up or other insolvency of the counterparty or any of its subsidiaries (or any analogous proceeding) or seeking any reorganisation, arrangement, composition, re-adjustment, liquidation, dissolution or similar relief (other than a solvent reconstruction, amalgamation or reorganisation to which the Bank has given its prior written consent) under any present or future statute, law or regulation, such petition not having been stayed or dismissed within 30 days of its filing; or (h) there is appointed a receiver, trustee or analogous officer to the counterparty or any of its subsidiaries or over all or any material part of the property of the counterparty or of any of its subsidiaries, unless the Bank has given its prior written confirmation that the Bank will not serve notice of the occurrence of an event of default on the basis of such appointment; or (i) (j) a declaration by the counterparty or any of its subsidiaries in writing, of its inability to pay all or any of its debts or to meet its obligations, or a voluntary general agreement or arrangement entered into by the counterparty or any of its subsidiaries with its creditors, or the counterparty or any of its subsidiaries is, or is deemed to be, insolvent or is deemed to be unable to pay its debts; or procedural steps preliminary to any matter referred to in (d), (e), (f) or (h) above being taken; or 18 (k) the counterparty or any of its subsidiaries has an authorisation to conduct activities under either Directive 2006/48/EC of the European Parliament and the

21 Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions, or Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC and repealing Council Directive 93/22/EEC) suspended or revoked; or (l) the counterparty or any of its subsidiaries is suspended or expelled from membership of any payment system or arrangement through which payments under monetary policy transactions are made or is suspended or expelled from membership of any securities settlement system used for the settlement of Eurosystem monetary policy transactions or any other securities exchange or association or other self-regulating organisation concerned with dealing in securities, or suspended or prohibited from dealing in securities by any government agency; or (m) measures such as are referred to in Section 5 of Title III of Directive 2006/48/EC of the European Parliament and the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions are taken against the counterparty or any of its subsidiaries; or (n) an event of default occurs in relation to the counterparty or any of its subsidiaries including any branch of that counterparty or subsidiary as the case may be, under any agreement, arrangement or transaction entered into by it including any branch of it with any other members of the Eurosystem for the purpose of effecting monetary policy operations where any other member has exercised its right to close out under any such agreement, arrangement or transaction; or (o) any event analogous to any of the events at (d) to (j), inclusive, above occurs in any jurisdiction in relation to the counterparty or any of its subsidiaries; or (p) the counterparty ceases to be entitled to operate, or ceases to operate the settlement account or, where the settlement account is opened in the name of a third party, such third party ceases to be so entitled or to so operate or withdraws its consent to the designation thereof as the settlement account for the purposes of this Documentation; or (q) the counterparty fails to comply with the Eurosystem s rules concerning the use of securities the subject of a transaction; or (r) (s) (t) the counterparty fails to provide to the Bank any information relevant to the Eurosystem s monetary policy operations, which failure causes severe consequences for the Bank; or the counterparty becomes subject to the freezing of funds and/or other measures imposed by the EU under Article 75 of the Treaty restricting the Counterparty s ability to use its funds; or the counterparty becomes subject to the freezing of funds and/or other measures imposed by a Member State restricting the Counterparty s ability to use its funds; or

22 (u) all or a substantial part of the counterparty s assets are subject to a freezing order, attachment, seizure or any other procedure that is intended to protect the public interest or the rights of the counterparty s creditors; or (v) all or a substantial part of the counterparty s assets are assigned to another entity; or (w) any other impending or existing event the occurrence of which may threaten the performance by the counterparty of its obligations under the arrangement it entered into for the purpose of effecting monetary policy operations or any other rules applying to the relationship between the counterparty and any of the central banks of the Eurosystem; or (x) an event of default (not materially different from any event of default falling within sub-clauses (a) to (w) of this paragraph 2.3 above) occurs in relation to the counterparty or any of its subsidiaries under any agreement concluded with any other member of the Eurosystem entered into for the purposes of the management of the foreign reserves or own funds of any such member of the Eurosystem, and, except in the case of an event which arises in relation to the counterparty and falls within sub-clauses (d) or (o) or (s) (in the case of (o), to the extent that it relates to sub-clause (d)) of paragraph 2.3 above, the Bank serves written notice on the counterparty stating that such an event shall be treated as an event of default for the purposes of this Documentation. In order to ensure the uniform implementation of the measures imposed following an event of default, the ECB s Governing Council may decide on the remedies, including suspension or exclusion from access to open market operations or the Eurosystem s standing facilities. Certain consequences of the events of default as specified above for certain of the monetary policy and other instruments and procedures the subject of this Documentation are set out in other chapters of, or in an annex to, this Documentation. Without prejudice to the continued application of the provisions of any such chapter or annex providing for such consequences, the following shall apply to all instruments and procedures the subject of this Documentation upon the occurrence of such an event of default or, if the Bank determines it appropriate to do so, on grounds of prudence, with respect to the counterparty: (a) all such instruments and procedures shall terminate immediately and the obligations of the parties there under shall fall due; (b) any amount (each, a "Relevant Amount") payable by one party (the "Payer") to the other (the "Payee"): (i) (ii) upon any termination referred to in (a) above; or otherwise pursuant to the arrangements provided for under this Documentation, 20

23 shall, at the option of the Bank, be reduced by its set-off against any amount(s) (an "Other Amount" which, for the avoidance of doubt, may include any other Relevant Amount or arise under any other agreement(s) between the Payee and the Payer or instrument(s) or undertaking(s) issued or executed by either of them to, or in favour of, the other) payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation). Each of any Relevant Amount and Other Amount so set off will be discharged promptly and in all respects to the extent that it is so set-off. The Bank will give notice to the counterparty of any set-off effected under this paragraph. For this purpose, if an Other Amount (or the relevant portion of such amounts) is not denominated in euro, it shall be converted into euro at the ECB daily euro foreign exchange reference rate or, if not available, the spot rate of exchange indicated by the ECB on the Business Day before the day on which the conversion is to be made for the sale by it of euro against a purchase by it of the currency in which such sum is denominated. If an Other Amount is unascertained, the Bank may in good faith estimate that obligation and set-off in respect of the estimate, subject to its accounting to the credit institution when the obligation is ascertained.

24 2.4 Possible measures on the Grounds of Prudence or following an Event of Default Following the occurrence of an event of default or on grounds of prudence, the Bank and/or the Eurosystem is entitled to exercise the following remedies: a) suspend, limit or exclude the Counterparty from access to open market operations; b) suspend, limit or exclude the Counterparty from access to the Eurosystem s standing facilities; c) terminate all outstanding agreements and transactions; d) demand accelerated performance of claims that have not yet matured or are contingent; e) use deposits of the Counterparty placed with the Bank to set off claims against the Counterparty; f) suspend the performance of obligations in respect of the Counterparty until the claim against the Counterparty has been satisfied In addition, following the occurrence of an event of default, the Bank may exercise the following remedies: a) claim default interest; b) claim an indemnity for any losses sustained as a consequence of a default by the Counterparty. In addition, on grounds of prudence, the Bank and/or the Eurosystem may reject, limit the use of or apply supplementary haircuts to assets submitted as collateral in Eurosystem credit operations by the relevant Counterparty. If an event of default occurs, the Bank shall realise all assets provided as collateral without undue delay and in such a way as to entitle the Bank to realise value for the credit provided, if the counterparty does not settle its negative balance promptly. In order to ensure the uniform implementation of the measures imposed, the ECB s Governing Council may decide on the remedies, including suspension, limitation or exclusion from access to open market operations or the Eurosystem s standing facilities Proportionate and non-discretionary applications of discretionary measures All discretionary measures required to ensure prudent risk management are applied and calibrated by the Eurosystem in a proportionate and non-discriminatory manner. Any discretionary measure taken vis-à-vis an individual counterparty will be duly justified. 22

25 CHAPTER 3: OPEN MARKET OPERATIONS Open market operations can be divided into four categories: i) main refinancing operations; ii) iii) iv) longer-term refinancing operations; fine-tuning operations; and structural operations. Reverse transactions are the main open market instrument of the Eurosystem and can be employed in all four types of operations. Reverse transactions refer to operations where the Eurosystem buys or sells eligible assets under repurchase agreements or conducts credit operations against eligible assets as collateral. In general, the Bank does not utilise repurchase agreements for Eurosystem credit operations but instead conducts Eurosystem credit operations against eligible assets as collateral. 3.1 Main Refinancing Operations The main refinancing operations are the most important open market operations conducted by the Eurosystem. The operational features of the main refinancing operations can be summarised as follows: i) they are liquidity-providing reverse operations; ii) they are executed regularly each week 19 ; iii) they have a maturity normally of one week 20 ; iv) they are executed through standard tenders (see Chapter 6); v) all counterparties fulfilling the general eligibility criteria (see Chapter 2, Section 2.1) may submit tender bids for the main refinancing operations; and vi) marketable and non-marketable assets (see Chapter 5) are eligible as underlying assets for the main refinancing operations. 3.2 Longer-Term Refinancing Operations The Eurosystem also executes regular refinancing operations through monthly tenders, normally with a three-month maturity, which are aimed at providing additional longer-term refinancing to the financial sector. Operations are usually executed in the form of variable rate tenders. From time to time, the ECB indicates the operation volume to be allotted in forthcoming tenders. Under exceptional circumstances, the Eurosystem may also execute longer-term refinancing operations through fixed-rate tenders. 19 The main and the longer-term refinancing operations are executed in accordance with the Eurosystem s pre-announced tender operations calendar, which can be found on the Bank s website ( or on the ECB s website ( 20 The maturity of the main and the longer-term refinancing operations may occasionally vary depending on, inter alia, bank holidays in Member States.

26 The operational features of the longer-term refinancing operations can be summarised as follows: i) they are liquidity-providing reverse operations; ii) they are executed regularly each month; iii) they have a maturity normally of three months; iv) they are executed through standard tenders (see Chapter 6); v) all counterparties fulfilling the general eligibility criteria (see Chapter 2) may submit tender bids for the longer-term refinancing operations; and vi) marketable and non-marketable assets (see Chapter 5) are eligible as underlying assets for the longer-term refinancing operations. 3.3 Fine-Tuning Operations Fine-tuning instruments include the following: a) reverse operations; b) foreign exchange swaps; and c) collection of fixed-term deposits. a) Reverse Operations The Eurosystem can execute fine-tuning operations in the form of reverse open market transactions. The features of these operations are that: i) they can take the form of liquidity-providing or liquidity-absorbing operations; ii) iii) their frequency is not standardised; their maturity is not standardised; iv) liquidity-providing fine-tuning reverse transactions are normally executed through quick tenders, although the possibility of using bilateral procedures is not excluded (see Chapter 6); v) as a rule, liquidity-absorbing fine-tuning reverse transactions are executed through bilateral procedures (see Chapter 6); vi) the Bank may select a limited number of counterparties to participate in fine-tuning reverse operations; and vii) marketable and non-marketable assets (see Chapter 5) are eligible as underlying assets for fine-tuning reverse operations. 24

27 b) Foreign Exchange Swaps Foreign exchange swaps executed for monetary policy purposes consist of simultaneous spot and forward transactions of the euro against foreign currency. Foreign exchange swaps executed for monetary policy purposes refer to operations where the Bank buys (or sells) euro spot against a foreign currency and, at the same time, sells (or buys) it back forward at a specified repurchase date. The provisions for foreign exchange swaps are specified. As a rule, the Eurosystem operates only in widely traded currencies and in accordance with standard market practice. In each foreign exchange swap operation, the Bank and the counterparties agree on the swap points for the transaction. The swap points are the difference between the exchange rate of the forward transaction and the exchange rate of the spot transaction. The swap points of the euro vis-à-vis the foreign currency are quoted according to general market conventions. The operational features of foreign exchange swaps can be summarised as follows: i) they can take the form of liquidity-providing or liquidity-absorbing operations; ii) iii) iv) their frequency is not standardised; their maturity is not standardised; they are executed through quick tenders or bilateral procedures (see Chapter 6); and v) the Bank may select a limited number of counterparties to participate in foreign exchange swap operations (see Annex 4). This annex also sets out the legal terms and conditions relevant for foreign exchange swaps. c) Collection of Fixed-Term Deposits The Eurosystem may invite counterparties to place remunerated fixed-term deposits with the Bank. The collection of fixed-term deposits is envisaged only for fine-tuning purposes in order to absorb liquidity in the market. The deposits accepted from counterparties are for a fixed term and with a fixed rate of interest. No collateral is given by the Bank in exchange for the deposits. The interest rate applied to deposits is a simple interest rate with the day-count convention of actual/360. Interest is paid on maturity of the deposit.

28 The operational features for the collection of fixed-term deposits can be summarised as follows: i) the deposits are collected in order to absorb liquidity; ii) iii) iv) the frequency with which deposits are collected is not standardised; the maturity of the deposits is not standardised; the collection of deposits is normally executed through quick tenders, although the possibility of using bilateral procedures is not excluded (see Chapter 6); and v) the Bank may select a limited number of counterparties for the collection of fixed-term deposits (see Chapter 2). 3.4 Structural Operations Reverse Operations The Bank can execute structural operations in the form of reverse open market transactions, aimed at adjusting the structural position of the Eurosystem vis-à-vis the financial sector. The operational features of structural operations can be summarised as follows: i) they are liquidity-providing operations; ii) iii) their frequency can be regular or non-regular; their maturity is not standardised a priori; iv) they are executed through standard tenders (see Chapter 6); v) all counterparties fulfilling the general eligibility criteria (see Chapter 2) may submit tender bids for structural reverse operations; and vi) both marketable and non-marketable assets (see Chapter 5) are eligible as underlying assets for the structural reverse operations. Issuance of Debt Certificates The ECB may issue debt certificates with the aim of adjusting the structural position of the Eurosystem vis-à-vis the financial sector so as to create (or enlarge) a liquidity shortage in the market. ECB debt certificates constitute a debt obligation of the ECB vis-à-vis the holder of the certificate. They are issued and held in a book-entry form in securities depositories in the euro area. The ECB does not impose any restrictions on the transferability of debt certificates. 26

29 Further provisions related to ECB debt certificates will be contained in the terms and conditions for such certificates. ECB debt certificates are issued at a discount, i.e. they are issued at below the nominal amount and are redeemed at maturity at the nominal amount. The difference between the discounted issue amount and the redemption amount equals the interest accrued on the discounted issue amount, at the agreed interest rate, over the maturity of the certificate. The interest rate applied is a simple interest rate with the day-count convention of actual/360. See Box 1 below for the calculation of the discounted issue amount. The operational features of the issuance of ECB debt certificates can be summarised as follows: i) the certificates are issued in order to absorb liquidity from the market; ii) iii) the certificates can be issued on a regular or non-regular basis; the certificates have a maturity of less than twelve months; iv) the certificates are issued through standard tenders (see Chapter 6) by the Bank on behalf of the ECB; and v) all counterparties fulfilling the general eligibility criteria (see Chapter 2) may submit tender bids for the subscription of ECB debt certificates. Box 1: Issuance of ECB Debt Certificates The discounted issue amount is: where: N = nominal amount of the ECB debt certificate r I = interest rate (in %) D = maturity of the ECB debt certificate (in days) P T = discounted issue amount of the ECB debt certificate Outright Transactions 1 PT N ri D 1 36,000 Outright open market transactions refer to operations where the Bank buys or sells eligible assets outright in the market. Outright open market operations are only executed for structural purposes. An outright transaction implies a full transfer of ownership from the seller to the buyer with no connected reverse transfer of ownership. The transactions are executed in accordance with the market conventions for the debt instrument used in the transaction.

30 In the calculation of prices, the Bank acts in accordance with the most widely accepted market convention for the debt instruments used in the transaction. The operational features of outright transactions can be summarised as follows: i) they can take the form of liquidity-providing (outright purchase) or liquidity-absorbing (outright sale) operations; ii) their frequency is not standardised; iii) they are executed through bilateral procedures (see Chapter 6); iv) no restrictions are placed a priori on the range of counterparties to outright transactions; and v) only marketable assets (as specified in Chapter 5) are used as underlying assets in outright transactions. 28

31 CHAPTER 4: STANDING FACILITIES 4.1 The Marginal Lending Facility Type of instrument Counterparties may use the marginal lending facility to obtain overnight liquidity from the Bank at a pre-specified interest rate against the provision of eligible assets (see Chapter 5). The facility is intended to satisfy counterparties temporary liquidity needs. Under normal circumstances, the interest rate on the facility provides a ceiling for the overnight market interest rate. The terms and conditions of the facility are identical throughout the euro area. Legal nature The Bank will provide liquidity under the marginal lending facility in the form of overnight collateralised loans. The provisions for the relevant legal agreements relating to the use of the marginal lending facility are set out in Chapter 9. Access conditions Institutions fulfilling the general counterparty eligibility criteria specified in Chapter 2 may access the marginal lending facility. Access to the marginal lending facility is granted only on Irish business days. At the end of each business day, the existence of a debit position on a counterparty s settlement account with the Bank is deemed to be a request for recourse to the marginal lending facility and the amount of the debit position is automatically converted to borrowings from the marginal lending facility. The procedures for end-of-day access to the marginal lending facility are specified in Annex 1. A counterparty may also be granted access to the marginal lending facility by sending a request to the Bank. In order to process the request in TARGET2-Ireland, the request must be received by the Bank at the latest 15 minutes following the TARGET2-Ireland closing time. i.e. 17:15 21 (17:30 in the case of the last Irish business day of the minimum reserve maintenance period). In the request, the amount of credit required is to be stated and, if sufficient underlying assets for the transaction are not already in the Counterparty s Collateral Pool, they must be transferred without delay to the Bank if the credit requested is to be extended by the Bank. Apart from the requirement to present sufficient underlying eligible assets, no limit is specified as to the amount of funds that can be advanced under the marginal lending facility. 21 As a general rule, the closing time for TARGET2-Ireland is 17:00. The deadline for requesting access to the marginal lending facility is (this deadline is postponed by an additional 15 minutes to on the last Eurosystem Business Day of a reserve maintenance period). TARGET2-Ireland closing days are announced on the Bank s website ( and on the ECB s website (

32 Maturity and interest rates The maturity of credit extended under the marginal lending facility is overnight. The credit is repaid at the opening of TARGET2-Ireland and the securities settlement systems (SSSs) on the following Irish business day. The interest rate is announced in advance by the Bank and is calculated as a simple interest rate with the day-count convention of actual/360. The ECB may change the interest rate at any time, with effect not earlier than the following Eurosystem Business Day. 22 Interest under the marginal lending facility is payable with the repayment of the credit. Suspension of the facility Access to the marginal lending facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time. 4.2 The Deposit Facility Type of instrument Counterparties can use the deposit facility to make overnight deposits with the Bank. The deposits are remunerated at a pre-specified interest rate. Under normal circumstances, the interest rate on the facility provides a floor for the overnight market interest rate. The terms and conditions of the deposit facility are identical throughout the euro area 23. Legal nature The overnight deposits accepted from counterparties are remunerated at a fixed rate of interest. No collateral is given to counterparties in exchange for the deposits. Access conditions Institutions fulfilling the general counterparty eligibility criteria specified in Chapter 2 may access the deposit facility. Access to the deposit facility is granted only on Irish business days. Direct Participants in TARGET2-Ireland and Home Accounting Module (HAM) account holders may access the overnight deposit facility directly via the Information & Control Module (ICM). 22 Decisions on interest rate changes are taken by the Governing Council. These decisions are normally made when it assesses the monetary policy stance (at its first meeting of the month) and become effective only from the beginning of the new reserve maintenance period. 23 Operational differences resulting from the existence of different account structures in national central banks may exist across euro area countries. 30

33 HAM account holders which do not have access to the ICM may send a request to the Bank at any time up to 17:00 (17:15 in the case of the last Irish business day of the minimum reserve maintenance period). The amount that a counterparty may deposit under the facility is limited to the amount on their end-of-day RTGS/HAM account. Maturity and interest terms The maturity of deposits under the facility is overnight. Deposits held under the facility mature at the opening of TARGET2-Ireland on the following Irish business day and will be repaid at that stage. The interest rate is announced in advance by the Bank and is calculated as a simple interest rate with the day-count convention of actual/360. The ECB may change the interest rate at any time, with effect not earlier than the following Eurosystem Business Day. 24 Interest on the deposits is payable on maturity of the deposit. Suspension of the facility Access to the facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time. 24 See footnote 22

34 CHAPTER 5: ELIGIBLE ASSETS 5.1 General Considerations Article 18.1 of the Statute of the ESCB allows the ECB and the NCBs to transact in financial markets by buying and selling underlying assets outright or under repurchase agreements and requires all Eurosystem credit operations to be based on adequate collateral. Consequently, all Eurosystem liquidity-providing operations are based on underlying assets provided by the counterparties either in the form of the transfer of ownership of assets (in the case of outright transactions or repurchase agreements) or in the form of a pledge, an assignment or a charge granted over relevant assets (in the case of collateralised loans). 25 In general, the Bank does not provide for counterparties to utilise repurchase agreements for Eurosystem liquidityproviding operations. With the aims of protecting the Eurosystem from incurring losses in its monetary policy operations and of ensuring the equal treatment of counterparties, as well as of enhancing operational efficiency and transparency, underlying assets have to fulfil certain criteria in order to be eligible for Eurosystem monetary policy operations. The Eurosystem has developed a single framework for eligible assets common to all Eurosystem credit operations. This single framework (also referred to as the Single List ) came into effect on 1 January 2007 and replaced the two-tier system that had been in place from the start of Economic and Monetary Union. The single framework comprises two distinct asset classes marketable assets and nonmarketable assets. No distinction is made between the two asset classes with regard to the quality of the assets and their eligibility for the various types of Eurosystem monetary policy operations, except that (i) non-marketable assets are not used by the Eurosystem for outright transactions and (ii) only a Counterparty s Collateral Pool (as defined in Section 1.1 of the framework agreement in respect of Eurosystem Operations secured over collateral pool assets)assets may be used as underlying assets for intra-day credit. To ensure that the two asset classes comply with the same credit standards, a Eurosystem credit assessment framework (ECAF) has been set up, which relies on different credit assessment sources. The procedures and rules establishing and controlling the Eurosystem s requirement of high credit standards for all eligible collateral are outlined in Section 5.5. The risk control measures and valuation principles for underlying assets are set out in Sections 5.6 and 5.7. Eurosystem counterparties may use eligible assets on a cross-border basis (see Section 5.8). 25 Liquidity-absorbing outright and reverse open market operations are also based on underlying assets. For underlying assets used in liquidity-absorbing reverse open market operations, the eligibility criteria are identical to those applied for underlying assets used in liquidity-providing reverse open market operations. However, no valuation haircuts are applied in liquidity-absorbing operations. 32

35 Eligible marketable assets and certain eligible non-marketable assets, for example credit claims, are mobilised on a pooled basis under the framework agreement in respect of Eurosystem Operations secured over collateral pool assets. Certain non-marketable assets, MBPNs, are mobilised on an earmarked basis under the framework agreement in respect of mortgage-backed promissory notes. 5.2 Eligibility Specifications for Underlying Assets The ECB establishes, maintains and publishes a list of eligible marketable assets. 26 For nonmarketable assets, the ECB will neither publish a list of eligible assets nor a list of eligible debtors/guarantors. The Eurosystem shall only provide counterparties with advice regarding eligibility as Eurosystem collateral if already issued marketable assets or outstanding non-marketable assets are submitted to the Eurosystem as collateral. There shall thus be no pre-issuance advice Eligibility Criteria for Marketable Assets Debt certificates issued by the ECB and all debt certificates issued by the NCBs of the Eurosystem prior to the date of adoption of the euro in their respective Member State are eligible. To determine the eligibility of other marketable assets, the following eligibility criteria are applied: Type of asset It must be a debt instrument having: (a) (b) a fixed, unconditional principal amount 27 ; and a coupon that cannot result in a negative cash flow and is one of the following: (i) fixed, zero and multi-step coupons, i.e. instruments with a predefined coupon schedule and predefined coupon values; 26 This list is published and updated daily on the ECB s website ( Marketable assets issued by non-financial corporations without a rating from an external credit assessment institution (ECAI) for the issue, issuer or guarantor are not included in the public list of eligible marketable assets. For these debt instruments, the eligibility status is dependent on the credit assessment of the credit assessment source chosen by the respective counterparty in accordance with the ECAF rules applicable to credit claims as set out in Section Bonds with warrants or other similar rights attached are not eligible.

36 (ii) flat floating coupons linked to only one index corresponding to a euro money market rate, e.g. EURIBOR, LIBOR and similar indices, or a constant maturity swap rate, e.g. CMS, EIISDA, EUSA indices; (iii) leveraged and de-leveraged floating coupons linked to only one index corresponding to a euro money market rate, e.g. EURIBOR, LIBOR and similar indices, or a constant maturity swap rate, e.g. CMS, EIISDA, EUSA indices; (iv) flat, leveraged and de-leveraged floating coupons linked to the yield of one euro area government bond that has a maturity of one year or less (either an index or a gross benchmark yield); (v) flat inflation-floaters linked to euro area inflation indices, containing no discrete range, range accrual, ratchet or similar complex structures. The following coupon structures are notably excluded: all floaters linked to foreign currency interest rates, commodity and equity indices and exchange rates, dual floaters and floaters linked to swap spreads or to another combination of indices, and any kind of ratchet and range accrual coupons, as well as inverse floaters and coupons that depend on a credit rating. Moreover, complex term structures such as target redemption notes and options to change the coupon type by making use of additional calling rights are excluded. Eligible coupons should have no issuer optionalities, i.e. they should not allow changes in the coupon definition during the life of the instrument that are contingent on an issuer s decision. In addition, if caps or floors exist, these shall be fixed and pre-defined. The classification of an instrument as regards its coupon, in case the coupon is multi-step, will be based on a forwardlooking perspective. Non-compliance with the above-mentioned eligibility criteria also precludes assets from being eligible even if they only apply to parts of the remuneration structure (such as a premium) and even if a non-negative coupon payment and a repayment of at least the principal amount is explicitly guaranteed. The requirements under (a) and (b) above apply until the obligation has been redeemed. Debt instruments may not give rise to rights to the principal and/or the interest that are subordinated to the rights of holders of other debt instruments of the same issuer. Additional eligibility criteria applicable to asset-backed securities For the purpose of the Eurosystem legal framework related to monetary policy, covered bonds are not considered asset-backed securities. 34

37 Requirement (a) above does not apply to asset-backed securities. The Eurosystem assesses the eligibility of asset-backed securities against the additional criteria laid down in this Section. The cash flow generating assets backing the asset-backed securities must fulfil the following requirements: (a) the acquisition of such assets must be governed by the law of an EU Member State; (b) they must be acquired from the originator or from an intermediary by the securitisation special purpose vehicle in a manner which the Eurosystem considers to be a true sale that is enforceable against any third party, and is beyond the reach of the originator and its creditors or the intermediary and its creditors, including in the event of the originator s or the intermediary s insolvency 28 ; (c) they must be originated and sold to the issuer by an originator incorporated in the EEA and, if applicable, an intermediary incorporated in the EEA; (d) they must not consist, in whole or in part, actually or potentially, of tranches of other asset-backed securities 29. In addition, they must not consist, in whole or in part, actually or potentially, of credit-linked notes, swaps or other derivatives instruments 30 or synthetic securities; (e) if they are credit claims, the obligors and the creditors must be incorporated (or, if natural persons, resident) in the EEA and, if relevant, the related security must be located in the EEA. The law governing those credit claims must be the law of an EEA country. If they are bonds, the issuers must be incorporated in the EEA, they must be issued in an EEA country under the law of an EEA country and any related security must be located in the EEA. As laid down in Section , the issuer of an asset-backed security must be established in the EEA. In cases where originators or, if applicable, intermediaries, were incorporated in the euro area, or in the United Kingdom, the Eurosystem has verified that there were no severe clawback provisions in those jurisdictions. If the originator or, if applicable, the intermediary, is incorporated in another EEA country, the asset-backed securities can only be considered 28 An asset-backed security shall not be considered eligible if any of the assets, which are part of the cash-flow generating assets backing the asset-backed securities, were originated by the special purpose vehicle issuing the ABS notes. 29 This requirement does not exclude asset-based securities where the issuance structure includes two special purpose vehicles and the true sale requirement is met in respect of those special-purpose vehicles so that the debt instruments issued by the second special-purpose vehicle are directly or indirectly backed by the original pool of assets and all cash flows from the cash flow generating assets are transferred from the first to the second special-purpose vehicle. 30 This restriction does not encompass swaps used in asset-backed securities transactions strictly for hedging purposes.

38 eligible if the Eurosystem ascertains that its rights would be protected in an appropriate manner against clawback provisions considered relevant by the Eurosystem under the law of the relevant EEA country. For this purpose, an independent legal assessment in a form acceptable to the Eurosystem must be submitted setting out the applicable clawback rules in the country, before the asset-backed securities can be considered eligible. To decide whether its rights are adequately protected against clawback rules, the Eurosystem may require other documents, including a solvency certificate from the transferee, for the suspect period. Clawback rules which the Eurosystem considers to be severe and therefore not acceptable include rules under which the sale of cash flow generating assets backing the asset-backed securities can be invalidated by the liquidator solely on the basis that it was concluded within a certain period (suspect period) before the declaration of insolvency of the seller (originator/intermediary), or where such invalidation can only be prevented by the transferee if they can prove that they were not aware of the insolvency of the seller (originator/intermediary) at the time of the sale. Within a structured issue, in order to be eligible, a tranche (or sub-tranche) may not be subordinated to other tranches of the same issue. A tranche (or sub-tranche) is considered to be non-subordinated vis-à-vis other tranches (or sub-tranches) of the same issue if, in accordance with the priority of payment applicable after the delivery of an enforcement notice, as set out in the prospectus, no other tranche (or sub-tranche) is given priority over that tranche or sub-tranche in respect of receiving payment (principal and interest), and thereby such tranche (or sub-tranche) is last in incurring losses among the different tranches or sub-tranches of a structured issue. For structured issues where the prospectus provides for the delivery of an acceleration and an enforcement notice, non-subordination of a tranche (or sub-tranche) must be ensured under both acceleration and enforcement notice-related priority of payments. For asset-backed securities to become or to remain eligible for Eurosystem monetary policy operations, the Eurosystem requires comprehensive and standardised loan-level data on the pool of cash flow generating assets underlying an asset-backed security to be submitted by the relevant parties in the asset-backed security, in accordance with Annex 9. To determine the eligibility of asset-backed securities, the Eurosystem takes into account the data entered in the mandatory fields in the relevant loan-level data reporting template, within the meaning of Appendix 9. In its eligibility assessment the Eurosystem takes account of: (a) any failure to deliver data; and (b) how frequently individual loan-level data fields are found to contain no meaningful data. In order to be eligible, an asset-backed security must be backed by cash-flow generating assets that the Eurosystem considers to be homogeneous, i.e. that the cash-flow generating assets backing an asset-backed security belong to only one of the following asset classes: (a) residential mortgages; (b) commercial real estate mortgages; (c) loans to small- and mediumsized enterprises; (d) auto loans; (e) consumer finance loans; (f) leasing receivables; or (g) 36

39 credit card receivables. Asset-backed securities shall not be eligible for Eurosystem monetary policy operations if the pool of assets underlying them is comprised of heterogeneous assets. The Eurosystem reserves the right to request from any relevant third party, e.g. the issuer, the originator or the arranger, any clarification and/or legal confirmation that it considers necessary to assess the eligibility of asset-backed securities and with regard to the provision of loan-level data. Non-compliance with such requests may lead to suspension of or refusal to grant eligibility to the asset-backed security transaction in question. Additional eligibility criteria applicable to covered bonds Covered bonds shall be subject, from 31 March 2013, to the following additional requirements: The cover pool of a covered bond shall not contain asset-backed securities, with the exception of asset-backed securities which: (a) comply with the requirements laid down in Directives 2006/48/EC and 2006/49/EC in respect of asset-backed securities in covered bonds; (b) were originated by a member of the same consolidated group of which the issuer of the covered bonds is also a member or by an entity affiliated to the same central body to which the issuer of the covered bonds is also affiliated; (c) are used as a technical tool to transfer mortgages or guaranteed real-estate loans from the originating entity into the cover pool. Covered bonds which were on the list of eligible asset-backed securities from 28 November 2012 and did not comply with requirements (a) to (c) will remain eligible until 28 November Credit standards The debt instrument must meet high credit standards specified in the ECAF rules for marketable assets as set out in Section Place of issue The debt instrument must be issued in the EEA with a central bank or with a central securities depository (CSD) that has been positively assessed by the Eurosystem pursuant to the standards and assessment procedures described in the Framework for the assessment of

40 securities settlement systems and links to determine their eligibility for use in Eurosystem credit operations (hereinafter the Eurosystem User Assessment Framework ) : In case a marketable debt instrument is issued by a non-financial corporation, 33 which is not rated by an accepted external credit assessment institution (ECAI), the place of issue must be the euro area Settlement procedures The debt instrument must be transferable in book-entry form. It must be held and settled in the euro area through an account with the Eurosystem or with an SSS that has been positively assessed by the Eurosystem pursuant to the standards and assessment procedures described in the Eurosystem User Assessment Framework, so that perfection and realisation of collateral are subject to the law of a Member State. 34 If the CSD where the asset is issued and the CSD where the asset is held are not identical, then the two CSDs must be connected by a link positively assessed by the Eurosystem pursuant to the standards and assessment procedures described in the Eurosystem User Assessment Framework The Eurosystem User Assessment Framework is published on the ECB s website at 32 International debt securities in global bearer form issued on or after 1 January 2007, through the ICSDs Euroclear Bank SA/NV and Clearstream Banking Luxembourg must, in order to be eligible, be issued in the form of new global notes and must be deposited with a common safekeeper which is an ICSD or, if applicable, a CSD that has been positively assessed by the Eurosystem pursuant to the standards and assessment procedures described in the Eurosystem User Assessment Framework. International debt securities in global bearer form that were issued in the form of classical global notes prior to 1 January 2007 and fungible securities issued under the same ISIN code on or after that date remain eligible until maturity. International debt securities issued in global registered form through the ICSDs Euroclear Bank SA/NV and Clearstream Banking Luxembourg after 30 September 2010 must, in order to be eligible, be issued under the new safekeeping structure for international debt securities. International debt securities in global registered form issued before or on that date remain eligible until their maturity. International debt securities in individual note form will cease to be eligible if issued after 30 September International debt securities in individual note form issued before or on that date remain eligible until their maturity. 33 Non-financial corporations are defined as in the European System of Accounts 1995 (ESA 95). 34 The Bank maintains an account with Euroclear Bank SA/NV to settle certain marketable assets (these assets comprise Irish government bonds, assets issued into Euroclear Bank SA/NV and assets transferred using eligible links). 35 The list of eligible links is published on the ECB s website at 38

41 Acceptable markets The debt instrument must be admitted to trading on a regulated market as defined in Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC 36, or admitted to trading on certain non-regulated markets as specified by the ECB 37. The assessment of non-regulated markets by the Eurosystem is based on three principles safety, transparency and accessibility Type of issuer/guarantor The debt instrument may be issued or guaranteed by central banks, public sector entities, private sector entities, or international or supranational institutions Place of establishment of the issuer/guarantor The issuer must be established in the EEA or in one of the non-eea G10 countries. 39 In the latter case, the debt instruments can only be considered eligible if the Eurosystem ascertains that its rights would be protected in an appropriate manner, as determined by the Eurosystem, under the laws of the respective non-eea G10 country. For this purpose, a legal assessment in a form and with substance acceptable to the Eurosystem will have to be submitted before the assets can be considered eligible. In the case of an asset-backed security, the issuer must be established in the EEA. The guarantor must be established in the EEA unless a guarantee is not needed to establish the high credit standards for marketable assets referred to in Section International or supranational institutions are eligible issuers/guarantors irrespective of their place of establishment. In case a marketable debt instrument is issued by a non-financial corporation that is not rated by an ECAI, the issuer/guarantor must be established in the euro area. 36 OJ L 145, , p A list of acceptable non-regulated markets is published on the ECB s website at and updated at least once a year. 38 Safety, transparency and accessibility are defined by the Eurosystem exclusively in terms of the performance of the Eurosystem s collateral management function. The selection process is not aimed at assessing the intrinsic quality of the various markets. The principles are to be understood as follows. Safety is taken to mean certainty with regard to transactions, in particular certainty on the validity and enforceability of transactions. Transparency is taken to mean unimpeded access to information on the market s rules of procedure and operation, the financial features of the assets, the price formation mechanism, and the relevant prices and quantities (quotes, interest rates, trading volumes, outstanding amounts, etc.). Accessibility refers to the Eurosystem s ability to take part in and have access to the market; a market is accessible for collateral management purposes if its rules of procedure and operation allow the Eurosystem to obtain information and conduct transactions when needed for these purposes. 39 Non-EEA G10 countries currently comprise the United States, Canada, Japan and Switzerland.

42 Currency of denomination The debt instrument must be denominated in euro Eligibility Criteria for Non-Marketable Assets Three types of non-marketable assets are eligible as collateral in the single framework for eligible assets: fixed term deposits from eligible counterparties, credit claims and nonmarketable retail mortgage-backed debt instruments (RMBDs) Credit claims To be eligible for use by the Bank s counterparties, a credit claim 42,43 has to fulfil the following eligibility criteria: (a) Type of asset: It must be a credit claim which is a debt obligation of a debtor vis-àvis a counterparty of the Bank. Credit claims that have a reducing balance (i.e. where the principal and interest are paid off according to a pre-agreed schedule) are also eligible. Undrawn credit lines (e.g. undrawn facilities of revolving credit claims), current account overdrafts and letters of credit (which authorise the use of credit but are not credit claims per se) are not eligible. The share of a syndicate member institution in a syndicated loan is considered an eligible type of credit claim. Credit claims may not afford rights to the principal and/or the interest that are subordinated to the rights of holders of other credit claims (or other tranches or sub-tranches in the same syndicated loan) or debt instruments of the same issuer. (b) The credit claim must have: (i) a fixed, unconditional principal amount; and (ii) an interest rate that cannot result in a negative cash flow. These features must be maintained until the redemption of the obligation. In addition, the interest rate should be one of the following: (i) zero coupon- style; (ii) fixed; (iii) floating linked to another interest rate reference. Furthermore, credit claims with their interest rate linked to the inflation rate are also eligible. (c) Type of debtor/guarantor: Eligible debtors and guarantors are non-financial corporations, 44 public sector entities and international or supranational institutions. Each debtor is individually and severally liable for the full repayment of the credit claim in question (co-debtors jointly liable for individual credit claims are excluded). 40 Expressed as such or in the national denominations of the euro. 41 Mortgage Backed Promissory Notes (MBPNs) in the case of Ireland. 42 Credit claims are also referred to as bank loans. Schuldscheindarlehen and Dutch registered private claims on the government or other eligible debtors that are covered by a government guarantee (e.g. housing associations) are deemed to be equivalent to credit claims. 43 Refer to Annex 7 for step-by-step procedures on the use of domestic credit claims by counterparties. 44 Non-financial corporations are defined as in the European System of Accounts 1995 (ESA 95). 40

43 (d) Place of establishment of the debtor/guarantor: The debtor must be established in the euro area. The guarantor must also be established in the euro area, unless a guarantee is not needed to establish the high credit standards for non-marketable assets referred to in Section This requirement does not apply to international or supranational institutions. (e) Credit standards: The quality of credit claims is assessed through the underlying creditworthiness of the debtor or guarantor. Credit claims must meet the high standards specified in the ECAF rules for non-marketable assets, as set out in Section (f) Minimum size: At the time of submission for use as collateral (mobilisation) by the counterparty, the credit claim must meet a minimum size threshold. The Bank applies a minimum size threshold of 500,000 for domestic credit claims. For crossborder use, a common minimum threshold of is applicable. (g) Handling procedures: The handling procedures relating to domestic credit claims are set out below in Section while those relating to cross-border credit claims are set out in section (h) Governing laws: The credit claim agreement and the agreement between the counterparty and the NCB mobilising the credit claim as collateral ( mobilisation agreement ) must both be governed by the law of a Member State. Furthermore, the total number of different governing laws that are applicable to (i) the counterparty, (ii) the debtor, (iii) the guarantor (if relevant), (iv) the credit claim agreement and (v) the mobilisation agreement may not exceed two. (i) Currency of denomination: The credit claim must be denominated in euro. 45 In addition, credit claims must satisfy the legal requirements set out in Section and Appendix 7 of Annex of Guideline of the ECB of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem. In summary, these legal requirements relate to: (a) the verification of the existence of credit claims; (b) the notification of the debtor about the mobilisation of the credit claim or the registration of such mobilisation; (c) the absence of restrictions related to banking secrecy and confidentiality; (d) the absence of restrictions on the mobilisation of the credit claim; (e) the absence of restrictions on the realisation of the credit claim. Further details of the specific features of these requirements may be determined and notified by the Bank to counterparties. 45 Expressed as such or in the national denominations of the euro.

44 Non-marketable mortgage-backed debt instruments (RMBDs) Mortgage-backed promissory notes (MBPNs) are a form of RMBD. The eligibility criteria for MBPNs are set out in the Framework Agreement in respect of Mortgage-Backed Promissory Notes (see template version of this agreement in Chapter 9) Handling Procedures for Domestic Credit Claims Legal: For domestic credit claims, the Bank will secure its interest in the credit claims offered as collateral by way of floating charge. Counterparties wishing to use credit claims as collateral are required to execute the framework agreement in respect of Eurosystem operations secured over collateral pool assets and related deed of charge (template versions of which are included in Chapter 9). Details of this charge, and of the negative pledge contained therein, are required to be registered at the Companies Registration Office. If the credit claim is to a debtor located in Ireland this registration requirement applies to any counterparty of the Bank. Clause 9.2(b) of the deed of charge requires the counterparty to ensure, if it is a company to which Section 99 or Section 111 of the Companies Act, 1963 applies, that particulars of the deed of charge including, without limitation, details of the negative pledge covenant contained in Clause 5 therein, will be registered in accordance with such section within 21 days of the charge being created, and that if it is not such a company but is subject to a corresponding obligation under any other law and/or under its internal constitutional documents, such corresponding particulars will be duly registered in accordance with the provisions of such law and/or such documents. Eligibility check: For domestic credit claims, the Bank will adopt a self-certification approach whereby counterparties contract 46 to present only eligible credit claims for collateral purposes. Under this approach, counterparties will provide, in a format determined by the Bank, information relating to eligible debtors/guarantors and credit claims to the Bank in conformity with the variables listed in Annex 6. Operational eligibility is confirmed when the Bank assigns a unique identifier number to the debtor/guarantor and credit claim respectively and returns the file, (inclusive of the unique numbers) to counterparties Verification Checks / Procedures for Credit Claims By the Bank: Before counterparties can use credit claims for collateral purposes, the Bank will carry out one-off verification checks of the procedures used by counterparties to submit the information on the existence of credit claims (including debtors). In addition, it will conduct random checks on the quality and accuracy of counterparties self-certification. By the counterparty: Every quarter, counterparties are required to do the following in writing (to be signed by CEO, CFO, manager of similar authority or an authorised signatory on behalf of one of them): (i) confirm and warrant compliance of credit claims submitted to the Bank with 46 By accepting the terms of this Document and executing the framework agreement in respect of Eurosystem operations secured over collateral pool assets and related deed of charge (see template in Chapter 9). 42

45 the eligibility criteria applied by the Eurosystem; (ii) confirm and warrant that no credit claim submitted as an underlying asset is being simultaneously used, or will be so used in the future, as collateral to the benefit of any third party; and, (iii) confirm and warrant to communicate to the Bank immediately (no later than within the course of the next business day) any event which materially affects the (actual contractual relationship between the counterparty and the Bank eligibility of the loan(s), in particular early, partial or total repayments, downgrades and material changes in the conditions of the credit claim(s). 5.3 Terms and Conditions for Non-marketable Assets MBPNs The terms and conditions relating to MBPNs (a form of retail mortgage backed debt instruments (RMBDs)) are set out in this Document and the Framework Agreement in respect of Mortgage-Backed Promissory Notes (see template version of this agreement in Chapter 9). Credit Claims The terms and conditions relating to credit claims are set out in this Document and the framework agreement in respect of Eurosystem operations secured over collateral pool assets and related deed of charge (see template version of this agreement in Chapter 9). 5.4 Rules for the Use of Eligible Assets Marketable assets can be used for all monetary policy operations which are based on underlying assets, i.e. reverse and outright open market transactions and the marginal lending facility. Non-marketable assets can be used as underlying assets for reverse open market transactions and the marginal lending facility. They are not used in Eurosystem outright transactions. All marketable and non-marketable assets can also be used as underlying assets for intraday credit. Irrespective of the fact that a marketable or non-marketable asset fulfils all eligibility criteria, a counterparty may not submit as collateral any asset issued or guaranteed by itself or by any other entity with which it has close links In the event of a counterparty using assets that, owing to an identity with the issuer/debtor/guarantor or the existence of close links, it may not or no longer use to secure an outstanding credit, it is obliged to immediately notify the Bank thereof. The assets are valued at zero on the next valuation date and a margin call may be triggered (see also Section 2.2). In addition, the counterparty has to remove the asset on the earliest possible date.

46 Close links means any of the following situations where the counterparty is linked to an issuer/debtor/guarantor of eligible assets: (a) the counterparty owns directly, or indirectly, through one or more other undertakings, 20% or more of the capital of the issuer/debtor/guarantor; (b) the issuer/debtor/guarantor owns directly, or indirectly through one or more other undertakings, 20% or more of the capital of the counterparty; (c) a third party owns more than 20% of the capital of the counterparty and more than 20% of the capital of the issuer/debtor/guarantor, either directly or indirectly, through one or more undertakings. For monetary policy implementation purposes, in particular for the monitoring of compliance with the rules for the use of eligible assets concerning close links, the Eurosystem internally shares information on capital holdings provided by supervisory authorities for such purposes. The information is subject to the same secrecy standards as applied by supervisory authorities. The above provisions concerning close links do not apply to: a) close links between the counterparty and an EEA public sector entity which has the right to levy taxes, or in the case where a debt instrument is guaranteed by an EEA public sector entity which has the right to levy taxes; b) covered bank bonds issued in accordance with the criteria set out in Part 1, points 68 to 70 of Annex VI to Directive 2006/48/EC; c) cases in which debt instruments are protected by specific legal safeguards comparable to those instruments given under (b) such as in the case of: i. non-marketable RMBDs which are not securities; or ii. covered bank bonds for which all criteria set out in Part 1, points 68 to 70 of Annex VI to Directive 2006/48/EC are complied with, except for the limits on guaranteed loans in the cover pool. Moreover, a counterparty may not submit as collateral any asset-backed security if the counterparty (or any third party with which it has close links) provides a currency hedge to the asset-backed security by entering into a currency hedge transaction with the issuer as a hedge counterparty or provides liquidity support for 20% or more of the outstanding amount of the asset-backed security. 44

47 All eligible marketable and non-marketable assets must be usable in a cross-border context throughout the euro area. This implies that all Eurosystem counterparties must be able to use eligible assets either through links with their domestic SSSs in the case of marketable assets or through other eligible arrangements to receive credit from the NCB of the Member State in which the counterparty is established (see Section 5.8). A counterparty submitting an asset-backed security which has close links to the originator of the underlying assets of the asset-backed security must inform the Eurosystem of any planned modification to that asset-backed security that could potentially have an impact on its credit quality, e.g. alteration in the interest rate due on the notes, a change in the swap agreement, changes in the composition of underlying loans not provided for in the prospectus, changes to the priority of payments. The Eurosystem must be given one month prior notice of any modification to be made to a submitted asset-backed security. Moreover, at the time of the asset-backed security s submission, the counterparty should provide information on any modification that took place in the preceding six months. In line with Section 5.2, the Eurosystem does not give pre-modification advice. Despite their eligibility, the Bank may decide not to accept the following marketable or nonmarketable assets as collateral from a counterparty: a) debt instruments falling due in the immediate future; and b) debt instruments with an income flow, e.g. a coupon payment, occurring in the immediate future. Table 2: Eligible assets for Eurosystem monetary policy operations Eligibility criteria Marketable assets 1) Non-marketable assets 2) Type of asset ECB debt certificates Credit claims RMBDs Other marketable debt instruments 3) Credit The asset must meet The debtor/guarantor must The asset must standards high credit standards. meet high credit standards. meet high credit The high credit The creditworthiness is standards. The high standards are assessed assessed using ECAF rules for credit standards using ECAF rules for credit claims. are assessed using marketable assets. 3) ECAF rules for RMBDs. Place of issue EEA 3) Not applicable Not applicable

48 Settlement/ Place of settlement: Eurosystem procedures Eurosystem handling euro area procedures procedures Instruments must be centrally deposited in book-entry form with NCBs or an SSS positively assessed by the Eurosystem pursuant to the standards and assessment procedures described in the Eurosystem User Assessment Framework Type of NCBs Public sector Credit institutions issuer/debtor/ Public sector Non-financial corporations guarantors Private sector International and International and supranational institutions supranational institutions Place of Issuer 3) : EEA or non-eea Euro area Euro area establishment G10 countries of the issuer, debtor and guarantor Debtor: EEA Guarantor 3) : EEA Acceptable Regulated markets Not applicable Not applicable markets Non-regulated markets accepted by the ECB Currency Euro Euro Euro Minimum size Not applicable Minimum size threshold at the time of submission of the credit claim - for domestic use: minimum size Not applicable 46

49 threshold of EUR 500, for cross-border use: common threshold of EUR Governing laws For asset-backed Governing law for credit Not applicable securities the claim agreement and acquisition of the mobilisation: law of a underlying assets must Member State be governed by the law of an EU Member State. The law governing underlying credit claims must be the law of an EEA country The total number of different laws applicable to (a) the counterparty; (b) the creditor; (c) the debtor; (d) the guarantor (if relevant); (e) the credit claim agreement; and (f) the mobilisation agreement shall not exceed two Cross-border use Yes Yes Yes 1) Further details are set out in Section ) Further details are set out in Section ) The credit standard of non-rated marketable debt instruments issued or guaranteed by non-financial corporations is determined on the basis of the credit assessment source chosen by the relevant counterparty in accordance with the ECAF rules applicable to credit claims, as set out in Section In the case of these marketable debt instruments, the following eligibility criteria for marketable assets have been amended: place of establishment of the issuer/guarantor: euro area; place of issue: euro area. 5.5 Eurosystem Credit Assessment Framework Scope and Elements The Eurosystem credit assessment framework (ECAF) defines the procedures, rules and techniques which ensure that the Eurosystem requirement of high credit standards for all eligible assets is met.

50 Within this general framework, the Eurosystem differentiates between marketable and nonmarketable assets (see Section and 5.5.3) in order to take account of the different legal nature of these assets and for operational efficiency reasons. In the assessment of the credit standard of eligible assets, the Eurosystem takes into account credit assessment information from credit assessment systems belonging to one of four sources, namely external credit assessment institutions (ECAIs), NCBs in-house credit assessment systems (ICASs), counterparties internal ratings-based (IRB) systems or third-party providers rating tools (RTs). Additionally, in the assessment of the credit standard the Eurosystem takes into account institutional criteria and features guaranteeing similar protection for the instrument holder such as guarantees. With regard to the ECAI source, the assessment must be based on a public rating. The Eurosystem reserves the right to request any clarification that it considers necessary. For asset-backed securities, ratings must be explained in a publicly available credit rating report, being a detailed pre-sale or new issue report, including inter alia a comprehensive analysis of structural and legal aspects, a detailed collateral pool assessment, an analysis of the transaction participants as well as an analysis of any other relevant particularities of a transaction. Moreover ECAIs must publish regular surveillance reports for asset-backed securities. The publication of these reports should be in line with the frequency and timing of coupon payments. These reports should at least contain an update of the key transaction data (e.g. composition of the collateral pool, transaction participants, capital structure, etc.), as well as performance data. The Eurosystem s benchmark for establishing its minimum requirement for high credit standards (its credit quality threshold ) is defined in terms of a credit assessment of credit quality step 3 in the Eurosystem s harmonised rating scale. 48 The Eurosystem considers a probability of default (PD) over a one-year horizon of 0.40% as equivalent to a credit assessment of credit quality step 3, subject to regular review. The ECAF follows the definition of a default event given in the Capital Requirements Directive (CRD) 49. The Eurosystem publishes the lowest rating grade meeting the required credit quality threshold for each accepted ECAI, without assuming any responsibility for its assessment of the ECAI, again subject to regular review. With regard to asset-backed securities, the Eurosystem s benchmark for establishing its minimum requirements for high credit standards is defined in terms of a triple A credit assessment 50 at issuance. Over the lifetime of the asset-backed security, the 48 The Eurosystem s harmonised rating scale is published on the ECB s website at A credit quality step 3 credit assessment means a minimum long-term rating of BBB- by Fitch or Standard & Poor s, of Baa3 by Moody s, or of BBBL by DBRS. 49 The CRD comprises Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (OJ L 177, , p. 1) and Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) (OJ L 177, , p. 201). 50 Triple A means a long-term rating of AAA by Fitch, Standard & Poor s or DBRS, or Aaa by Moody s. 48

51 Eurosystem s minimum threshold of credit quality step 2 of the Eurosystem s harmonised rating scale ( single A ) must be retained 51. With regard to MBPNs, the Eurosystem s benchmark for establishing its minimum requirement for high credit standards is defined in terms of a credit assessment of credit quality step 2 in the Eurosystem s harmonised rating scale ( single A ). The Eurosystem considers a PD over a one-year horizon of 0.10 % as equivalent to a credit assessment of credit quality step 2, subject to regular review. The Eurosystem reserves the right to determine whether an issue, issuer, debtor or guarantor fulfils its requirements for high credit standards on the basis of any information it may consider relevant and may reject, limit the use of assets or apply supplementary haircuts on such grounds if required to ensure adequate risk protection of the Eurosystem in line with Article 18.1 of the Statute of the ESCB. Such measures can also be applied to specific counterparties, in particular if the credit quality of the counterparty appears to exhibit a high correlation with the credit quality of the collateral assets submitted by the counterparty. In case such a rejection is based on prudential information, the use of any such information transmitted either by counterparties or by supervisors shall be strictly commensurate with, and necessary for, the performance of the Eurosystem s institutionary tasks of conducting monetary policy. Assets issued or guaranteed by entities subject to the freezing of funds and/or other measures imposed by the EU under Article 75 of the Treaty or by an EU Member State restricting the use of their funds or in respect of which the ECB's Governing Council issued a decision suspending or excluding their access to open market operations or the Eurosystem's standing facilities may be excluded from the list of eligible assets. In order to ensure the consistency, accuracy and comparability of the four credit assessment sources used in the ECAF, the Eurosystem has devised acceptance criteria for each of these sources (see Section 5.5.4) and monitors regularly their credit assessment performance against the credit quality threshold (see Section 5.5.5) Establishment of High Credit Standards for Marketable Assets The high credit standards for marketable assets are established based on the following set of criteria: ECAI credit assessment: At least one credit assessment from an accepted ECAI (as set out in Section 5.5.4) for the issue (or, in its absence, for the issuer) must comply with the Eurosystem s credit quality threshold 52. The ECB publishes the credit quality threshold for any accepted ECAI, as established under Section Single A means a minimum long-term rating of A- by Fitch or Standard & Poor s, or A3 by Moody s, or AL by DBRS. 52 If multiple and possibly conflicting ECAI assessments are available for the same issuer/debtor or guarantor, the first-best rule (i.e. the best available ECAI credit assessment) is applied. 53 This information is published on the ECB s website (

52 ECAI credit assessment of asset-backed securities: For asset-backed securities issued on or after 1 March 2010, the Eurosystem requires at least two credit assessments from any accepted ECAIs for the issue. To determine the eligibility of these asset-backed securities, the second-best rule is applied, which means that not only the best, but also the second-best available ECAI credit assessment must comply with the credit quality threshold for asset-backed securities. Based on this rule, the Eurosystem requires for both credit assessments an AAA / Aaa level at issuance and a single A level over the life of the security in order for the securities to be eligible. From 1 March 2011 all asset-backed securities, regardless of their date of issuance, must have at least two credit assessments from any accepted ECAIs for the issue, and the second-best rule must be complied with in order for the securities to remain eligible. For asset-backed securities issued before 1 March 2009 both credit assessments must comply with the single A level over the life of the security. For asset-backed securities issued between 1 March 2009 and 28 February 2010, the first credit assessment must comply with the AAA / Aaa level at issuance and the single A level over the life of the security, while the second credit assessment must comply with the single A level both at issuance 54 and over the life of the security. Fungible tap issues of asset-backed securities are considered to be new issuances of assetbacked securities. All asset-backed securities issued under the same ISIN code must comply with the eligibility criteria in place at the date of the latest fungible tap issuance. For fungible tap issues of asset-backed securities which are not compliant with the eligibility criteria in place at the date of the latest fungible tap issuance, all the assetbacked securities under the same ISIN code are considered ineligible. This rule shall not apply in the case of fungible tap issuances of asset-backed securities which were on the Eurosystem list of eligible assets on 10 October 2010 if the latest tap issuance occurred before that date. Non-fungible tap issuances are considered to be different asset-backed securities. Guarantees: In the absence of an (acceptable) ECAI credit assessment of the issuer, high credit standards can be established on the basis of guarantees provided by financially sound guarantors. The financial soundness of the guarantor is assessed on the basis of ECAI credit assessments meeting the Eurosystem s credit quality threshold. The guarantee must meet the following requirements: A guarantee is deemed acceptable if the guarantor has unconditionally and irrevocably guaranteed the obligations of the issuer in relation to the payment of principal, interest and any other amounts due under the debt instruments to the holders thereof until they are discharged in full. 54 Concerning the second ECAI assessment, credit assessment at issuance refers to the credit assessment when first issued or published by the ECAI. 50

53 The guarantee has to be payable on first demand (independently from the underlying debt obligation). Guarantees given by public entities entitled to levy taxes should either be payable on first demand or otherwise provide for prompt and punctual payment following default. The obligations of the guarantor under the guarantee need to rank at least equally and rateably (pari passu) with all other unsecured obligations of the guarantor. The guarantee must be governed by the law of an EU Member State and be legally valid and binding and enforceable against the guarantor. A legal confirmation concerning the legal validity, binding effect and enforceability of the guarantee will have to be submitted in a form and with substance acceptable to the Eurosystem before the asset supported by the guarantee can be considered eligible. If the guarantor is established in a jurisdiction other than the one of the law governing the guarantee, the legal confirmation shall also confirm that the guarantee is valid and enforceable under the law governing the establishment of the guarantor. The legal confirmation should be submitted for review to the NCB that is reporting a certain asset supported by a guarantee for inclusion in the list of eligible assets. 55 The need for a legal confirmation does not apply to guarantees given in respect of debt instruments with an individual asset rating or to guarantees given by public entities entitled to levy taxes. The requirement of enforceability is subject to any insolvency or bankruptcy laws, general principles of equity and other similar laws and principles applicable to the guarantor and generally affecting creditors rights against the guarantor. In the absence of an ECAI credit assessment for the issue, issuer or guarantor, the high credit standards are established as follows: Euro area public sector issuers or guarantors: If a marketable asset is issued or guaranteed by a regional government, local authority or public sector entity (PSE) established in the euro area as defined in the CRD, the following procedure applies: The issuer or guarantor is allocated to one of three classes in accordance with the CRD 56 as explained in Box The NCB reporting a certain asset is normally the NCB of the country in which the asset will be admitted to trading/traded on an acceptable market. In the event that an asset is admitted to trading/traded on multiple markets, any queries should be addressed to the ECB s Eligible Assets Hotline (Eligible- Assets.hotline@ecb.int). 56 Lists of entities belonging to the three classes, as well as the criteria for classifying issuers, debtors or guarantors into the three classes are expected to be made available, together with links to the relevant websites of the national supervisory authorities, the European Banking Authority s (EBA s) website at

54 An implicit credit assessment for issuers or guarantors belonging to classes 1 and 2 is derived from the ECAI credit assessment of the central government of the country where the issuer or guarantor is established. This implicit credit assessment has to meet the Eurosystem credit quality threshold. No implicit credit assessment is derived for issuers/guarantors belonging to class 3. Euro area non-financial corporate issuers or guarantors: If the high credit standards for marketable assets which are issued/guaranteed by non-financial corporations 57 established in the euro area cannot be established on the basis of an ECAI credit assessment for the issue, issuer or guarantor, the ECAF rules for credit claims will be applicable and counterparties are allowed to make use of their own IRB system, NCBs inhouse credit assessment systems or third-party rating tools. The non-rated marketable debt instruments issued by non-financial corporations are not included in the public list of eligible marketable assets. Box 2: Implicit credit assessments for euro area regional government, local authority and public sector entity issuers, debtors or guarantors without an ECAI credit assessment Allocation of issuers, debtors or guarantors following the CRD ECAF derivation of the implicit credit assessment of the issuer, debtor or guarantor belonging to the corresponding class Class 1 Class 2 Regional governments, local authorities and PSEs that according to competent supervisory authorities can be treated equally to the central government for capital requirements purposes Regional governments, local authorities and PSEs that according to competent supervisory authorities can be treated equally to [credit] institutions for capital requirements purposes Allocated the ECAI credit assessment of the central government of the country in which it is established Allocated a credit assessment one credit quality step 1 below the ECAI credit assessment of the central government of the country in which it is established Class 3 Other PSEs Treated like private sector issuers or debtors 1. Information on the credit quality steps is published on the ECB s website ( 57 Non-financial corporations are defined as in the European System of Accounts 1995 (ESA 95). 52

55 5.5.3 Establishment of High Credit Standards for Non-Marketable Assets Credit claims In order to establish the requirement for high credit standards for the debtors or guarantors of credit claims, counterparties have to select one main credit assessment source from among those that are available and accepted by the Eurosystem. A counterparty will select one system from an available credit assessment source, except in the case of ECAIs, where all accepted ECAI systems may be used. Counterparties have to stick to the selected source for a minimum period of one year so as to preclude hopping between credit assessments (i.e. looking for the best credit assessment that guarantees eligibility among all available sources or systems on a debtor-by-debtor basis). Counterparties wishing to change credit assessment sources after the minimum period of one year have to submit a reasoned request to the Bank. Counterparties may be allowed to use more than one system or source upon submission of a reasoned request. The main credit assessment source chosen is expected to cover the largest number of submitted debtors by the counterparty. The use of more than one credit assessment source or system should be supported by the existence of a sufficient business case. In principle, such a case could stem from a lack of sufficient coverage of the primary credit assessment source or system. Counterparties must inform the Bank promptly of any credit event, including a delay of payments by the submitted debtors that is known to the counterparty and, if necessary, withdraw or replace the assets. Furthermore, counterparties are responsible for ensuring that they use the most recent credit assessment updates available from their selected credit assessment system or source for the debtors 58 or guarantors of submitted assets Credit assessments of debtors/guarantors The high credit standards of the debtors or guarantors of credit claims are established according to rules differentiating between public sector and non-financial corporate debtors/guarantors: Public sector debtors or guarantors: The following rules are applied in a sequential order: (i) A a credit assessment from the system or source selected by the counterparty exists and is used to establish whether the public sector debtor or guarantor meets the credit quality threshold. (ii) In the absence of a credit assessment under (i), an ECAI credit assessment of the debtor or guarantor is used In the case of marketable assets issued by non-financial corporations but not rated by an accepted ECAI, this requirement applies to the credit assessment of issuers. 59 If multiple and possibly conflicting ECAI assessments are available for the same issuer/debtor or guarantor, the first-best rule (i.e. the best available ECAI credit assessment) is applied.

56 (iii) If no credit assessment is available under either (i) or (ii), the same procedure as for marketable assets applies: o o The debtor or guarantor is allocated to one of three classes in accordance with the CRD 60 as explained in Box 2. An implicit credit assessment for debtors or guarantors belonging to classes 1 and 2 is derived from the ECAI credit assessment of the central government of the country where the debtor or guarantor is established. This implicit assessment has to meet the Eurosystem credit quality threshold. If a credit assessment from the system or source selected by the counterparty (or from an ECAI in case (ii) for public sector debtors or guarantors) exists but is below the credit quality threshold, the debtor or guarantor is ineligible. Non-financial corporate debtors or guarantors: If the source selected by the counterparty provides a credit assessment equal to, or exceeding the credit quality 61, 62 threshold, the debtor or guarantor is eligible. If a credit assessment from the system or source selected by the counterparty exists but is below the credit quality threshold, the debtor or guarantor is ineligible. If no credit assessment is available to establish the credit standards, the debtor or guarantor is considered ineligible. Guarantees: A guarantee must meet the following requirements: A guarantee is deemed acceptable if the guarantor has unconditionally and irrevocably guaranteed the obligations of the debtor in relation to the payment of principal, interest and any other amounts due under the credit claim to the holder thereof until they are discharged in full. In this regard, a guarantee deemed acceptable does not need to be specific to the credit claim but might apply to the debtor only, provided that it also covers the credit claim in question. The guarantee has to be payable on first demand (independently from the underlying credit claim). Guarantees given by public entities entitled to levy taxes should either be payable on first demand or otherwise provide for prompt and punctual payment following default. The obligations of the guarantor under the guarantee need to rank at least equally and rateably (pari passu) with all other unsecured obligations of the guarantor. 60 Lists of entities belonging to the three classes, as well as the criteria for classifying issuers, debtors or guarantors into the three classes are expected to be made available, together with links to the relevant websites of the national supervisory authorities, the European Banking Authority s (EBA s) website at 61 If the counterparty has chosen an ECAI as a credit assessment source, it may use the first-best rule: if multiple and possibly conflicting ECAI assessments are available for the same issuer/debtor or guarantor, the best available ECAI credit assessment is applied. 62 For specific credit assessment systems, the credit quality threshold can be adjusted following the performance monitoring process (see Section 5.5.5). 54

57 The guarantee must be governed by the law of an EU Member State and be legally valid, and binding and enforceable against the guarantor. A legal confirmation concerning the legal validity, binding effect and enforceability of the guarantee will have to be submitted in a form and with substance acceptable to the Eurosystem before the asset supported by the guarantee can be considered eligible. The legal confirmation should also state that the guarantee is not a personal one, only enforceable by the creditor of the credit claim. If the guarantor is established in a jurisdiction other than the one of the law governing the guarantee, the legal confirmation shall also confirm that the guarantee is valid and enforceable under the law governing the establishment of the guarantor. The legal confirmation should be submitted for review to the NCB in the jurisdiction of the law governing the credit claim. The need for a legal confirmation does not apply to guarantees given by public entities entitled to levy taxes. The requirement of enforceability is subject to any insolvency or bankruptcy laws, general principles of equity and other similar laws and principles applicable to the guarantor and generally affecting creditors rights against the guarantor Mortgage Backed Promissory Notes MBPNs are publicly rated by Moody s. This rating, which relies on a combination of the senior unsecured rating of the counterparty / issuer plus a notching up to reflect the quality of the underlying pools backing the promissory notes, ensures that MBPNs meet the Eurosystem quality threshold. The Eurosystem s benchmark for high credit standards for MBPNs must be in line with Credit Quality Step 2 of the Eurosystem s harmonised rating scale Acceptance Criteria for Credit Assessment Systems The ECAF builds on credit assessment information from four sources. Under each source, there might be a set of credit assessment systems. The accepted ECAIs, ICASs and third-party rating tools (RTs) and their providers are listed on the ECB s website ( External credit assessment institution source The ECAI source encompasses those institutions whose credit assessments may be used by credit institutions for the determination of risk weight exposures according to the CRD. For the purposes of the ECAF, the general acceptance criteria for ECAIs are the following: ECAIs 64 must be formally recognised by the relevant EU supervisory authority for the euro area countries in which they will be used in line with the CRD. 63 The Eurosystem only publishes the information in conjunction with its Eurosystem credit operations and does not assume any responsibility for its evaluation of the accepted credit assessment systems.

58 ECAIs must fulfil operational criteria and provide relevant coverage so as to ensure the efficient implementation of the ECAF. In particular, the use of their credit assessments is subject to the availability to the Eurosystem of information on these assessments, as well as information for the comparison and the assignment (mapping) of the assessments with the ECAF credit quality steps and the credit quality threshold and for the implementation of performance monitoring (see Section 5.5.5). An ECAI participating in the ECAF is subject to the Eurosystem performance monitoring process (see Section 5.5.5). Together with the performance monitoring data submitted, a signed certification from the CEO, or authorised signatory with responsibility for the audit or compliance function within the ECAI, of the ECAI confirming the accuracy and validity of the performance monitoring information shall also be submitted. The Eurosystem reserves the right to decide whether it accepts an ECAI for its lending operations, making use, among other factors, of its performance monitoring process NCB in-house credit assessment system source The ICAS source currently consists of the four credit assessment systems operated by the Deutsche Bundesbank, the Banco de España, the Banque de France and the Oesterreichische Nationalbank. NCBs deciding to develop their own ICAS would be subject to a validation procedure by the Eurosystem. ICASs are subject to the Eurosystem performance monitoring process (see Section 5.5.5). Furthermore, the counterparty must inform the ICAS NCB promptly about any credit event that is known only to the counterparty, including a delay of payments by the submitted debtors. Moreover, in countries in which RMBDs are mobilised, the respective NCB implements a credit assessment framework for this type of asset in accordance with the ECAF. Such frameworks are subject to a yearly performance monitoring process ICAS for non-marketable Retail Mortgage-Backed Debt Instruments Irish Mortgage Backed Promissory Notes (MBPNs) are transferable non-marketable debt instruments, backed by a mortgage-loan cover pool which serves as security for the payment obligation of the relevant counterparty. These are issued without the need for formal securitisation. MBPNs are issued by bank or building society counterparties. A counterparty wishing to create MBPNs as collateral must first enter into a Framework Agreement (see 64 ECAIs are commonly referred to as rating agencies in financial markets. 56

59 Section 9.3) with the Bank. This Agreement allows for the creation of promissory notes, which are backed by a pool of mortgage loans secured on residential property in Ireland. A joint Bank-Moody s framework is applied for the purpose of assessing MBPNs. One of the criteria stipulated by Moody s 65 is that the relevant long-term issuer rating be at least Baa2. Moody s assigns a public long-term issue rating to MBPNs that is two notches above the unsecured rating of the relevant issuer subject to a cap of Aa1. On an annual basis the Bank conducts legal and operational checks in order to ensure that pools of Irish residential mortgages backing MBPNs comply with the eligibility criteria and format set out in the Framework Agreement. These checks involve on-site visits and follow up meetings to confirm counterparty compliance Internal Ratings-Based System Source A counterparty intending to use an IRB system to assess the credit quality of the debtors, issuers or guarantors of eligible debt instruments has to obtain the permission of the Bank. In this regard, it must file a request (see Annex 7), together with the following documents: 66 A copy of the decision of the relevant banking supervisory authority within the EU authorising it to use its IRB system for capital requirements purposes on a consolidated or unconsolidated basis, together with any specific conditions for such use. Information on its approach to assigning probabilities of default to debtors, as well as data on the rating grades and associated one-year probabilities of default used to determine eligible rating grades. A copy of the Pillar 3 (market discipline) information that the counterparty is required to publish on a regular basis in accordance with the requirements on market discipline under Pillar 3 of the Basel II framework and the CRD. The name and the address of both the relevant banking supervisor and the external auditor. The request has to be signed by the counterparty s chief executive officer (CEO), chief financial officer (CFO) or a manager of similar seniority, or by an authorised signatory on behalf of one of them. The above provisions apply to all counterparties regardless of their status parent, subsidiary or branch and regardless of whether the endorsement of the IRB system comes from the Bank or from a supervisor in the home country of the parent (for branches and possibly for subsidiaries). Any branch or subsidiary of a counterparty may rely on the IRB system of its parent if the Eurosystem has accepted the use of the IRB system for ECAF purposes. Counterparties using an IRB system as described above are also subject to the Eurosystem performance monitoring 65 see Link to Moody's assessment criteria for MBPNs (login access required) 66 If necessary, the listed documentation should be translated into English.

60 process (see Section 5.5.5). In this regard, counterparties must confirm in writing their willingness to comply with the monitoring reporting requirements. Specifically, before starting to use their IRB systems under ECAF, counterparties are required to submit to the Bank: the size of the static pool of all eligible debtors (non-financial corporations and public sector debtors) that fulfil the benchmark PD of the Eurosystem. One year after the start and then subsequently after each 12-month period, counterparties must submit: A realised default rate of the static pool delivered a year earlier; the updated size of the static pool of all eligible debtors (non-financial corporations and public sector debtors) that fulfil the benchmark PD of the Eurosystem. In addition to the information requirements for this process, the counterparty is under an obligation to communicate the following information on an annual basis (or as and when required by the Bank): a copy of the most up-to-date assessment of the counterparty s IRB system by the counterparty s supervisor translated into English if necessary; any changes to the counterparty s IRB system recommended or required by the relevant supervisor, together with the deadline by which such changes must be implemented; the annual update of the Pillar 3 [market discipline] information that the counterparty is required to publish on a regular basis in accordance with the requirements of the Basel II framework and the CRD. information on the relevant banking supervisor and the external auditor. This yearly communication has to be signed by the counterparty s CEO, CFO or a manager of similar seniority, or by an authorised signatory on behalf of one of them. The relevant supervisor receives a copy of this letter from the Bank Third-party RT source The RT source consists of entities that assess the credit quality of debtors by using primarily quantitative models in a systematic and mechanical manner, relying among other information on audited accounts, and whose credit assessments are not intended for general public disclosure. An RT provider, incorporated in Ireland, wishing to participate in the ECAF has to submit a request to the Bank using the template provided by the Eurosystem, supplemented by additional documentation as specified in the template. Counterparties incorporated in Ireland, wishing to use a specific RT provider for ECAF purposes that is not accepted by the Eurosystem have to submit a request to the Bank using the template provided by the Eurosystem, supplemented by additional documentation as specified in the template. The 58

61 Eurosystem decides whether to accept the RT provider based on evaluation of compliance with the acceptance criteria set by the Eurosystem. 67 Furthermore, the counterparty must inform the RT provider of any credit event that is known only to the counterparty, including a delay of payments by the submitted debtors. An RT provider participating in the ECAF needs to subject itself by agreement to the Eurosystem performance monitoring process. 68 (see Section 5.5.5). The RT provider is obliged to set up and maintain the necessary infrastructure for monitoring the static pool. Construction and evaluation of the static pool have to be in line with the general requirements on performance monitoring under the ECAF. The RT provider has to undertake to inform the Eurosystem of the results of the performance evaluation as soon as it has been carried out by the RT provider. Together with the performance monitoring data submitted, a signed certification from the CEO, or authorised signatory with responsibility for the audit or compliance function within the RT, confirming the accuracy and validity of the performance monitoring data must also be submitted. They have to undertake to keep internal records of static pools and default details for five years Performance Monitoring of Credit Assessment Systems All credit assessment systems are subject to performance monitoring within the ECAF. For each credit assessment system, the ECAF performance monitoring process consists of an annual ex post comparison of: (a) the observed default rates for all eligible entities and instruments rated by the credit assessment system, where these entities and instruments are grouped into static pools based on certain characteristics, e.g. credit rating, asset class, industry sector, credit assessment model; and (b) the appropriate credit quality threshold of the Eurosystem given by the benchmark PD (two benchmark PDs are considered: a 0.10% PD over a one year horizon which is considered equivalent to a credit assessment of credit quality step 2; and a 0.40% PD over a one year horizon which is considered equivalent to a credit assessment of credit quality step 3 of the Eurosystem harmonised rating scale). The aim of this process is to ensure that the mapping of the ratings provided by the credit assessment system to the Eurosystem harmonised rating scale remains appropriate and that the results from credit assessments are comparable across systems and sources. The first element of the process is the annual compilation by the credit assessment system provider of the list of entities and instruments with credit assessments that satisfy the Eurosystem credit quality threshold at the beginning of the monitoring period. This list shall then be submitted by the credit assessment system provider to the Eurosystem, using the template provided by the Eurosystem, which includes identification, classification and credit assessment related fields. The second element of the process takes place at the end of the 12- month monitoring period when the credit assessment system provider updates the 67 The acceptance criteria are listed on the ECB s website ( 68 The counterparty must inform the RT provider promptly about any credit event that may indicate a deterioration of the credit quality.

62 performance data for the entities and instruments on the list. The Eurosystem reserves the right to request any additional information required to conduct performance monitoring. The observed default rate of the static pools of a credit assessment system recorded over a one-year horizon serves as input to the ECAF performance monitoring process, which comprises an annual rule and a multi-period assessment. In case of a significant deviation between the observed default rate of the static pools and the credit quality threshold over an annual and/or a multi-annual period, the Eurosystem consults the credit assessment system provider to analyse the reasons for that deviation. This procedure may result in a correction of the credit quality threshold applicable to the system in question. The Eurosystem may decide to suspend or exclude the credit assessment system where no improvement in performance is observed over a number of years. In addition, in the event of an infringement of the rules governing the ECAF, the credit assessment system will be excluded from the ECAF. If inaccurate or incomplete information is provided by a representative of the credit assessment system for the purposes of performance monitoring, the Eurosystem may abstain from exclusion in case of minor irregularities. 5.6 Risk Control Measures General Principles Risk control measures are applied to the assets underlying Eurosystem credit operations in order to protect the Eurosystem against the risk of financial loss if underlying assets have to be realised owing to the default of a counterparty. The risk control measures at the disposal of the Eurosystem are described in Box 3. The Eurosystem applies specific risk control measures according to the types of underlying assets offered by the counterparty. The ECB determines the appropriate risk control measures for both marketable and non-marketable eligible assets. The risk control measures are broadly harmonised across the euro area 69 and ought to ensure consistent, transparent and nondiscriminatory conditions for any type of eligible asset across the euro area. The Eurosystem reserves the right to apply additional risk control measures if required to ensure adequate risk protection of the Eurosystem in line with Article 18.1 of the Statute of the ESCB. Such risk control measures, that shall be applied in a consistent, transparent and 69 Owing to operational differences across Member States, some differences in terms of risk control measures may prevail. For instance, in respect of the procedures for counterparties delivery of underlying assets to the NCBs (in the form of a pool of collateral pledged with the NCB or as repurchase agreements based on individual assets specified for each transaction), minor differences may occur with regard to the timing of the valuation and other operational features of the risk control framework. Furthermore, in the case of non-marketable assets, the precision of valuation techniques may differ, which is reflected in the overall level of haircuts (see Section 5.6.3). 60

63 non-discriminatory manner, can also be applied at the level of individual counterparties if required to ensure such protection. Box 3: Risk control measures The Eurosystem applies the following risk control measures: Valuation haircuts The Eurosystem applies valuation haircuts in the valuation of underlying assets. This implies that the value of the underlying asset is calculated as the market value of the asset less a certain percentage (haircut). Variation margins (marking to market) The Eurosystem requires the haircut-adjusted market value of the underlying assets used in its liquidity-providing reverse transactions to be maintained over time. This implies that if the value, measured on a regular basis, of the underlying assets falls below a certain level, the NCB will require the counterparty to supply additional assets or cash (i.e. it will make a margin call). Similarly, if the value of the underlying assets, following their revaluation, exceeds a certain level, the counterparty may retrieve the excess assets or cash. (The calculations relevant for the execution of margin calls are presented in Box 6). Limits in relation to the use of unsecured debt instruments The Eurosystem applies limits to the use of uncovered bank bonds which are described in Section The following risk control measures may also be applied by the Eurosystem at any time if required to ensure adequate risk protection of the Eurosystem in line with Article 18.1 of the Statute of the ESCB: Initial margins The Eurosystem may apply initial margins in its liquidity-providing reverse transactions. This would imply that counterparties would need to provide underlying assets with a value at least equal to the liquidity provided by the Eurosystem plus the value of the initial margin. Limits in relation to issuers/debtors or guarantors The Eurosystem may apply additional limits, other than those applied to the use of unsecured debt instruments, to the exposure vis-à-vis issuers/debtors or guarantors. Such limits can also be applied to specific counterparties, in particular if the credit quality of the counterparty appears to exhibit a high correlation with the credit quality of the collateral submitted by the counterparty. Application of supplementary haircuts The Eurosystem may apply supplementary haircuts if required to ensure adequate risk protection of the Eurosystem in line with Article 18.1 of the Statute of the ESCB. Additional guarantees The Eurosystem may require additional guarantees from financially sound entities in order to accept certain assets. Exclusion The Eurosystem may exclude certain assets from use in its monetary policy operations. Such exclusion may also be applied to specific counterparties, in particular if the credit quality of the counterparty appears to exhibit a high correlation with the credit quality of the collateral submitted by the counterparty.

64 5.6.2 Risk Control Measures for Marketable Assets The risk control framework for eligible marketable assets includes the following main elements: (a) Eligible marketable assets are allocated to one of five liquidity categories, based on issuer classification and asset type. The allocation is described in Box 4. (b) Individual debt instruments are subject to specific valuation haircuts. The haircuts are applied by deducting a certain percentage from the market value of the underlying asset. The haircuts applied to debt instruments included in categories I to IV differ according to the residual maturity and coupon structure of the debt instruments as described in Box 5 for eligible marketable fixed coupon and zero coupon debt instruments. 70 (c) The Eurosystem limits the use of unsecured debt instruments issued by a credit institution or by any other entity with which the credit institution has close links in accordance with the legal requirements set out in Section 5.4. Such assets may only be used as collateral by a counterparty to the extent that the value assigned to that collateral submitted by the Eurosystem after the application of haircuts does not exceed 5% of the total value of the collateral submitted by that counterparty after the haircuts. This limit does not apply to such assets that are guaranteed by a public sector entity which has the right to levy taxes, or if the value after haircuts of the uncovered bank bonds referred to above does not exceed 50 million. In the event of a merger between two or more issuers of such assets or the establishment of a close link between such issuers, these issuers are treated as one issuer group, in the context of this limitation, only up until one year after the date of the merger or the establishment of the close link. (d) Individual debt instruments included in category V are subject to a unique haircut of 16% regardless of maturity or coupon structure. (e) Individual asset-backed securities, covered bank bonds (jumbo covered bank bonds, traditional covered bank bonds and other covered bank bonds) and unsecured credit institution debt instruments that are theoretically valued according to Section 5.7 are subject to an additional valuation haircut. This haircut is directly applied at the level of theoretical valuation of the individual debt instrument in the form of a valuation markdown of 5%. (f) The haircut applied to marketable debt instruments included in categories I to IV with variable rate coupons 71 is that applied to the zero-to-one-year maturity bucket of fixed 70 The valuation haircut levels applied to fixed coupon debt instruments are also applicable to debt instruments, the coupon of which is linked to a change in the rating of the issuer itself or to inflation-indexed bonds. 71 A coupon payment is considered a variable rate payment if the coupon is linked to a reference interest rate and if the resetting period corresponding to this coupon is no longer than one year. Coupon payments for 62

65 coupon instruments in the liquidity category and the credit quality category to which the instrument is assigned. (g) The risk control measures applied to a marketable debt instrument included in categories I to IV with more than one type of coupon payment solely depend on the coupon payments during the remaining life of the instrument. The valuation haircut applied to such an instrument is set equal to the highest of the haircuts applicable to debt instruments with the same residual maturity, and coupon payments of any one of the types occurring in the remaining life of the instrument are considered. (h) No valuation haircuts are applied in liquidity-absorbing operations. (i) In a pooling system, the counterparty makes a pool of sufficient underlying assets available to the central bank to cover the related credits received, thus implying that individual assets are not linked to specific credit operations. (j) The assets are subject to daily valuation. On a daily basis, the Bank72 calculates the required value of underlying assets taking into account changes in outstanding credit volumes, the valuation principles outlined in Section 5.7 and the required valuation haircuts. Box 4: Liquidity categories for marketable assets 1 Category I Category II Category III Category IV Category V Central government debt instruments Local and regional government debt instruments Traditional covered bank bonds Credit institution debt instruments (unsecured) Asset-backed securities Debt instruments issued by central banks 2 Jumbo covered bank bonds 3 Debt instruments issued by nonfinancial corporate and other issuers 4 Debt instruments issued by financial corporation s other than credit institutions (unsecured) Agency debt instruments 4 Other covered bank bonds 5 Supranational debt instruments 1. In general, the issuer classification determines the liquidity category. However, all asset-backed securities are included in category V, regardless of the classification of the issuer, and Jumbo covered bank bonds are included in category II, while traditional covered bank bonds and other debt instruments issued by credit institutions are included in category III and IV. 2. Debt certificates issued by the ECB and debt instruments issued by the NCBs prior to the adoption of the euro in their respective Member State are included in liquidity category I. 3. Only instruments with an issuing volume of at least 1 billion, for which at least three market-makers provide regular bid and ask quotes, fall into the asset class of Jumbo covered bank bonds. 4. Only marketable assets issued by issuers that have been classified as agencies by the ECB are included in liquidity category II. Marketable assets issued by other agencies are included in liquidity category III or IV depending on the issuer and asset type. 5. Non-UCITS compliant covered bonds, including both structured covered bonds and multi-issuer covered bonds are included in liquidity category III. which the resetting period is longer than one year are treated as fixed rate payments, with the relevant maturity for the haircut being the residual maturity of the debt instrument. 72 When triparty services are being used from 29 September 2014, the valuation process is delegated to the TPA, based on information sent by the relevant NCB to the TPA.

66 Credit Quality Box 5: Levels of valuation haircuts applied to eligible marketable assets (%) Liquidity categories Residual Category I Category II(*) Category III(*) Category IV(*) Category V(*) Steps 1 and 2 (AAA to A-)(**) maturity (years) fixed coupon zero coupon fixed coupon zero coupon fixed coupon zero coupon fixed coupon zero coupon > Steps 3 (BBB+ to BBB-) (**) Not Eligible > * Individual asset-backed securities, covered bank bonds (jumbo covered bank bonds, traditional covered bank bonds and other covered bank bonds) and uncovered bank bonds that are theoretically valued in accordance with Section 5.7 are subject to an additional valuation haircut. This haircut is directly applied at the level of the theoretical valuation of the individual debt instrument in the form of a valuation markdown of 5 %. ** Ratings as specified in the Eurosystem s harmonised rating scale, published on the ECB s website ( If, after valuation, the underlying assets do not match the requirements as calculated on that day, symmetric margin calls are performed. In order to reduce the frequency of margin calls, the Bank will apply a trigger point of 0.5 per cent of the amount of the liquidity provided. The Bank requires margin calls to be effected through supply of additional assets (which may, at the Bank s discretion, include cash). This implies that if the market value of underlying assets falls below the lower trigger point, counterparties have to supply additional assets. Similarly, if the market value of the underlying assets, following their revaluation, were to exceed the upper trigger point, the Bank would, on request, return excess assets to the counterparty: counterparties may substitute underlying assets within the Counterparty s Collateral Pool on a daily basis. The substitution of ear-marked collateral (e.g., MBPNs) by other eligible assets may be permitted at the discretion of the Bank; and 64

67 the ECB may at any time decide to remove individual debt instruments from the published list of eligible marketable assets. 73 Box 6: Calculation of margin calls The total amount of eligible assets J (for j = 1 to J; value C j, t at time t ) a counterparty must provide for a set of liquidity-providing operations I (for i = 1 to I; amount determined by the following formula: where: h j is the valuation haircut applied to eligible asset j. at time t ) is Let be the time period between revaluations. The margin call base at time t equals: The Bank also takes into account interest accrued on liquidity provided in outstanding operations in the calculation of the margin call base. Margin calls are effected only if the margin call base exceeds a certain trigger point level. Let denote the trigger. For underlying assets that are earmarked against a specific advance ( I 1), a margin call is effected when: M M t t i 1 k Li, t (the counterparty pays the margin call to the Bank); or k Li, t (the Bank pays the margin call to the counterparty). For other underlying assets, the counterparty has to bring more assets into the Counterparty Collateral Pool if: I M L t k 0.5% M k L t J h j i, t 1 j 1 i 1 I i 1 i, t Conversely, the amount of intraday credit (IDC) available to the counterparty in a pooling system can be expressed as follows: IDC M (if positive) For both earmarked and pooled assets, margin calls shall ensure that the relation expressed in (1) above is re-established. I L C j, t J h j C i, t 1 j, t j 1 k t L i, t i 1 I L i, t (1) (2) 73 If, at the time of exclusion from the list of eligible marketable assets, a debt instrument is being used in a Eurosystem credit operation, it will have to be removed as soon as possible.

68 5.6.3 Risk Control Measures for Non-Marketable Assets Credit claims The risk control framework for eligible credit claims includes the following main elements: Individual credit claims are subject to specific valuation haircuts. The haircuts differ according to the residual maturity, type of interest payment (fixed or variable), the credit quality category and the valuation methodology applied by the Bank (see Section 5.7) or by the relevant NCB in the case of cross-border use of credit claims, as described in Box The haircut applied to credit claims with variable rate interest payments is that applied to the credit claims with fixed interest payments classified in the zero-toone-year maturity bucket corresponding to the same credit quality and the same valuation methodology (valuation based on a theoretical price assigned by the Bank (or by the relevant NCB in the case of cross border use) or on the outstanding amount assigned by the Bank or relevant NCB). An interest payment is considered a variable rate payment if it is linked to a reference interest rate and if the resetting period corresponding to this payment is no longer than one year. Interest payments for which the resetting period is longer than one year are treated as fixed rate payments, with the relevant maturity for the haircut being the residual maturity of the credit claim. The risk control measures applied to a credit claim with more than one type of interest payment depend only on the interest payments during the remaining life of the credit claim. If there is more than one type of interest payment during the remaining life of the credit claim, the remaining interest payments are treated as fixed rate payments, with the relevant maturity for the haircut being the residual maturity of the credit claim. The Bank applies the same trigger point (if applicable) for the execution of margin calls for marketable and non-marketable assets. 74 The valuation haircuts applied to credit claims with fixed rate interest payments are also applicable to credit claims, the interest payments of which are linked to the inflation rate. 66

69 Box 7: Levels of valuation haircuts applied to credit claims with fixed interest payments (%) Credit Quality Steps 1 and 2 (AAA to A-) Residual maturity (years) Valuation Methodology Fixed interest payment and valuation based on a theoretical price assigned by the Bank > Step 3 (BBB+ to BBB-) > Fixed interest payment and valuation based on the outstanding amount assigned by the Bank Mortgage Backed Promissory Notes MBPNs are subject to a valuation haircut of 24%. Fixed-term Deposits Fixed-term deposits are not subject to any valuation haircut. 5.7 Valuation Principles for Underlying Assets When determining the value of underlying assets used in reverse transactions, the Eurosystem applies the following principles 75 : 75 In conjunction with these Eurosystem principles, the Bank uses the concept of Liquidity and Nominal values in accordance with Clause 5.1 of the framework agreement in respect of Eurosystem Operations secured over collateral pool assets. Nominal value relates to the value of the collateral asset PRIOR to the application of the Bank s risk control procedures (e.g., the value of marketable asset by applying the market price or the par value of an asset). The Liquidity value of a collateral asset is the nominal value adjusted in accordance with the risk control procedures of the Bank.

70 5.7.1 Marketable assets (a) For each eligible marketable asset, the Eurosystem defines the most representative price to be used for the calculation of the market value. (b) The value of a marketable asset is calculated on the basis of the most representative price on the business day preceding the valuation date. In the absence of a representative price for a particular asset on the business day preceding the valuation date, the Eurosystem defines a theoretical price. The market or theoretical value of a debt instrument is calculated including accrued interest. Income flows (e.g. coupon payments) which are received by the Bank during the life of the reverse transaction are transferred to the counterparty provided that the relevant operations are still fully covered by a sufficient amount of underlying assets before the transfer of the income takes place. The Bank aims at ensuring that the economic effect of the treatment of income flows is equivalent to a situation where the income is transferred to the counterparty on the payment day. 76 The Bank may not hold in its accounts 77 event/action/notification such as: assets which are subject to a corporate i. The provision of information/documentation in relation to exemption from withholding tax; ii. The Certification of ownership applicable under U.S. law; iii. The exercise of voting rights; or iv. Any other corporate action event which requires the completion by the Bank of documentation in respect of securities held The counterparty should remove the concerned asset from its Collateral Pool before the record date or the certification date (i.e., whichever date determines the party required to take the action requested) so that any information/documentation/certification which may be requested will be provided by them and where applicable any voting rights will revert to them. In the event that the counterparty fails to remove the asset and it remains in the custody of the Bank on the date which determines who is required to provide the necessary documentation, the Bank will not be responsible for any possible consequences such as nonpayment of interest, blocking of the security, deduction of withholding tax or loss of voting rights. 76 The Bank may decide not to accept debt instruments with an income flow (e.g. a coupon payment) occurring in the period up to the maturity date of the monetary policy operation as underlying assets in reverse transactions (see Section 5.4) 77 Some CCBs will not allow the mobilisation of assets subject to US Withholding Tax unless the appropriate documentation has been lodged with them PRIOR to such mobilisation. 68

71 5.7.2 Non-marketable assets Non-marketable assets are assigned a value corresponding either to the theoretical price or to the outstanding amount. For domestic credit claims and MBPNs, the Bank will rely on the outstanding nominal amount for valuation purposes. For claims mobilised on a cross border basis, the valuation applied by the correspondent central bank (CCB) will be used by the Bank. 5.8 Cross-border Use of Eligible Assets Eurosystem counterparties may use eligible assets on a cross-border basis, i.e. they may obtain funds from the NCB of the Member State in which they are established by making use of assets located in another Member State. All eligible assets may be used on a cross-border basis by means of the correspondent central banking model (CCBM) and, in the case of marketable assets, through eligible links between EEA securities settlement systems (SSSs). A mechanism has been developed by the NCBs (and by the ECB) to ensure that all eligible assets may be used on a cross-border basis. This is the CCBM, under which NCBs act as custodians ( correspondents ) for each other (and for the ECB) in respect of assets accepted in their local depository, TPA 78 or settlement system. Specific solutions can be used for nonmarketable assets, i.e. credit claims and RMBDs, which cannot be transferred through an SSS 79. The CCBM may be used to collateralise all forms of Eurosystem credit operations. In addition to the CCBM, counterparties may use eligible links between SSSs for the cross-border transfer of marketable assets with their local SSS 80 ; counterparties may also use these eligible links between SSSs in combination with the CCBM (CCBM with links see Section 5.8.3). Furthermore, with effect from 29 September 2014, the CCBM (including CCBM with links) will be used as a basis for the cross-border use of triparty collateral management services Correspondent Central Banking Model The correspondent central banking model is illustrated in Chart 1 below. Chart 1: The correspondent central banking model Use of eligible assets deposited in country B by a counterparty established in country A in order to obtain credit from the NCB of country A. 78 Cross-border TPA services will be available from 29 September Details are provided in the brochure entitled Correspondent central banking model (CCBM) procedure for Eurosystem counterparties, which is published on the ECB s website at 80 Eligible assets may be used through an account of a central bank in an SSS located in a country other than that of the central bank in question if the Eurosystem has approved the use of such an account. Since August 2000, the Bank has been authorised to open such an account with Euroclear Bank SA/NV. This account can be used for all eligible assets held in Euroclear Bank SA/NV, i.e. including eligible assets transferred to Euroclear Bank SA/NV through eligible links

72 Country A Country B NCB A Information on collateral NCB B Information on collateral Credit SSS Collateral Counterparty A Custodian Transfer instructions All NCBs maintain securities accounts with each other for the purpose of the cross-border use of eligible assets. The precise procedure of the CCBM depends on whether the eligible assets are earmarked for each individual transaction or whether they are held in a pool of underlying assets. 81 Under the pooling system used by the Bank, once the Bank has been informed by the correspondent central bank that the collateral has been received, it then updates the total liquidity value of the counterparty s Collateral Pool and, if applicable, its intraday credit line in TARGET2-Ireland. Specific procedures for cross-border use have been developed for non-marketable assets, i.e. credit claims and MBPNs. 82 When credit claims are used as collateral in a cross-border context, a CCBM variant is applied to credit claims, which is based on a transfer of ownership to, an assignment to, a pledge in favour of the home central bank, or a charge in favour of the correspondent central bank acting as the agent for the Bank. A further ad hoc variant based on the charge in favour of the correspondent central bank acting as the agent for the Bank has been implemented to allow the cross-border use of MBPNs. For handling procedures relating to cross border credit claims, see Section The CCBM is available to counterparties (both for marketable and non- marketable assets) at least from 8 a.m. to 3 p.m. on each TARGET2 business day. A counterparty wishing to make use of the CCBM must advise the Bank before 3 p.m. Furthermore, the counterparty must ensure that the collateral for securing monetary policy operations is delivered to the account of the 81 See the brochure entitled Correspondent central banking model (CCBM) procedure for Eurosystem counterparties, which is available on the ECB s website at further explanations. 82 See the brochure entitled Correspondent central banking model (CCBM) procedure for Eurosystem counterparties, for further explanations. 70

73 correspondent central bank by 3.45 p.m. at the latest. Instructions or deliveries not respecting this deadline will only be treated on a best-effort basis and may be considered for credit given on the following TARGET2 business day. When the counterparties foresee a need to use the CCBM late in the day, they should, where possible, deliver the assets in advance (i.e. predeposit them). In exceptional circumstances or when required for monetary policy purposes, the ECB may decide to extend the CCBM s closing time until the TARGET2 closing time, and the ECB may decide to extend the CCBM s closing time until the TARGET2 closing time in cooperation with CSDs regarding their availability to extend their cut-off times for marketable assets Links between Securities Settlement Systems. In addition to the CCBM, eligible links between EEA SSSs can be used for the cross-border transfer of marketable assets. A direct or relayed link between two SSSs allows a participant in one SSS to hold securities issued in another SSS without being a participant in that other SSS 83. Before these links can be used to transfer collateral for Eurosystem credit operations, they have to be assessed and approved by the Eurosystem against, the standards and assessment procedures described in the Eurosystem User Assessment Framework 84. From a Eurosystem perspective, the CCBM and the links between EEA SSSs fulfil the same role of allowing counterparties to use collateral on a cross-border basis, i.e. both enable counterparties to use collateral to obtain credit from their home NCB, even if this collateral was issued in an SSS of another country. The CCBM and the links between SSSs perform this function in different ways. In the CCBM, the cross-border relationship is between the NCBs. They act as custodians for one another. Using the links, the cross-border relationship is between the SSSs. They open omnibus accounts with one another. Assets deposited with a correspondent central bank can only be used to collateralise Eurosystem credit operations. Assets held through a link can be used for Eurosystem credit operations, as well as for any other purpose selected by the counterparty. When using links between SSSs, the counterparties hold the assets on their own account with their home SSS and have no need for a custodian. 83 A link between two SSSs consists of a set of procedures and arrangements for the cross-border transfer of securities through a book-entry process. A link takes the form of an omnibus account opened by an SSS (the investor SSS) in another SSS (the issuer SSS). A direct link implies that no intermediary exists between the two SSSs. Relayed links between SSSs may also be used for the cross-border transfer of securities to the Eurosystem. A relayed link is a contractual and technical arrangement that allows two SSSs not directly connected to each other to exchange securities transactions or transfers through a third SSS acting as the intermediary. 84 The list of eligible links is available on the ECB s website at ww.ecb.europa.eu/paym/coll/coll/ssslinks/html/index.en.html

74 Chart 2: Links between securities settlement systems Use of eligible assets issued in the SSS of country B held by a counterparty established in country A through a link between the SSSs in countries A and B in order to obtain credit from the national central bank of country A. Country A Country B NCB A Credit Information on collateral SSS A SSS A holds assets on an omnibus account in SSS B SSS B Transfer instruction Counterparty A CCBM with links It is also be possible for counterparties to use direct and relayed links referred to in Section in combination with the CCBM to mobilise eligible marketable assets on a cross-border basis. When using links between SSSs in combination with the CCBM, counterparties hold the assets issued in the issuer SSS in an account with an investor SSS directly or via a custodian. In case of relayed links, a third SSS may act as an intermediary SSS. These assets can be issued in a non-euro area EEA CSD, provided that a link between the Issuer SSS and the Investor SSS has been positively assessed by the Eurosystem pursuant to the standards and assessment procedures described in the Eurosystem User Assessment Framework. 72

75 Chart 3: The correspondent central banking model with links Use of eligible assets issued in the SSS of country C and held in the SSS of country B by a counterparty established in country A through a direct link between the SSSs in country B and C in order to obtain credit from the NCB of country A. Where eligible assets are to be transferred via CCBM with links, counterparties shall ensure that the securities are delivered to an account at the relevant Investor SSS by 4 p.m. CET on the settlement date in order to ensure the settlement of the same day value operations. Any request for mobilisation received by the home NCBs from their counterparties after 4 p.m., or any request for the delivery of eligible assets to an account at the relevant Investor CSD after 4 p.m. CET is treated on a best effort basis, according to the cut-off times of the involved CSDs CCBM with triparty collateral management services With effect from 29 September 2014, the CCBM (including CCBM with links) will also be used as a basis for the cross-border use of triparty collateral management services, whereby the NCB of a Member State, where triparty collateral management services are offered for crossborder Eurosystem use, will act as CCB for NCBs in other Member States whose counterparties have requested to use the respective triparty collateral management services on a crossborder basis. The relevant TPA shall be positively assessed by the Eurosystem. Cross-border triparty collateral management services allow counterparties to increase or decrease the amount of collateral they provide to their home NCB (hereinafter referred to as the global amount ).

76 Chart 4: Cross-border triparty services Use of eligible assets held in the TPA of country B by a counterparty established in country A in order to obtain credit from the NCB of country A Note: The arrow Information on collateral between counterparty A and NCB A may not be relevant with certain TPAs (depending on the contractual model chosen) and in such case the counterparty does not send an instruction to NCB A or receive a confirmation from NCB A Handling Procedures for Cross Border use of Credit Claims Legal: For credit claims governed by the law of another euro area Member State ( crossborder use of credit claims), the credit claim will be mobilised using the correspondent central banking model. In this context, the NCB of the Member State whose laws govern the credit claim in question will act as the correspondent central bank (CCB), while the Bank will act as the home central bank (HCB). The CCB will act as agent of the Bank and the Bank s interest in a credit claim offered as collateral will be secured by a legal technique chosen by the CCB. 85 In order to be able to offer credit claims to the Bank as collateral on a cross-border basis, a counterparty must have accepted the legal terms and conditions for using credit claims contained in this Document and also any additional terms and conditions specified by CCBs. The latter may be viewed on the website of the central bank concerned; the ECB website ( contains hyperlinks to the relevant sections of the NCB websites. Where a counterparty of the Bank incorporated in Ireland wishes to use a credit claim to a debtor located in another euro area Member State, it is required to register the details of the security interest taken in that credit claim at the Companies Registration Office. 85 Annex 8 contains details for the various NCBs. 74

77 Eligibility Check: For cross border credit claims, there will be direct contact between the counterparty and the NCB of the euro area Member State whose law governs the claim, as requirements imposed by this NCB regarding the eligibility check apply. In this regard, some NCBs will adopt a self-certification approach while others will require the physical delivery of the loan documentation. Specific requirements may be viewed on the website of the central bank concerned. The ECB s website ( contains hyperlinks to the relevant sections of central bank websites. 5.9 Acceptance of Non-euro Denominated Collateral in Contingencies In certain situations, the Governing Council may decide to accept as eligible collateral certain marketable debt instruments issued by one or more non-euro area G10 central governments in their domestic currency. Upon such decision, the applicable criteria shall be clarified and the procedures to be applied in the selection and mobilisation of foreign collateral, including the sources and principles of valuation, the risk control measures and the settlement procedures, must also be communicated to counterparties. Notwithstanding the provisions of Section 5.2.1, such assets may be deposited/registered (issued), held and settled outside the EEA and may, as stated above, be denominated in currencies other than the euro. Any such assets used by a counterparty must be owned by the counterparty. Counterparties that are branches of credit institutions incorporated outside the EEA or Switzerland cannot use such assets as collateral.

78 CHAPTER 6: TENDER PROCEDURES 6.1 General Considerations Eurosystem open market operations are normally executed in the form of tender procedures. The Eurosystem s tender procedures are performed in six operational steps as specified in Box 8. Box 8: Operational Steps for Tender Procedures Tender announcement Step 1 Announcement by the ECB through public wire services and the ECB s website Step 2 Step 3 Counterparties preparation and submission of bids Compilation of bids by the Eurosystem Tender allotment and announcement of tender results Step 4 Step 5 a) ECB allotment decision b) Announcement of allotment results through public wire services and the ECB s website Certification of individual allotment results Step 6 Settlement of the transactions (see Chapter 7) The Eurosystem distinguishes between two different types of tender procedures: standard tenders and quick tenders. The procedures for standard and quick tenders are identical except for the timeframe and the range of counterparties. Standard Tenders For standard tenders, a maximum of 24 hours elapses from the announcement of the tender to the certification of the allotment result (where the time between the submission deadline and the announcement of the allotment result is approximately two hours). The ECB may decide to adjust the timeframe in individual operations, if deemed appropriate. The main refinancing operations, longer-term refinancing operations and structural operations (except outright transactions) are always executed in the form of standard tenders. Counterparties fulfilling the general eligibility criteria (see Chapter 2) may participate in standard tenders. 76

79 Quick Tenders Quick tenders are normally executed within 90 minutes of the announcement of the tender, with certification taking place immediately after the announcement of the allotment result. The ECB may decide to adjust the timeframe in individual operations, if deemed appropriate. Quick tenders are only used for the execution of fine-tuning operations. The Eurosystem may select a limited number of counterparties to participate in quick tenders. Fixed Rate and Variable Rate Tenders The Eurosystem has the option of conducting either fixed rate (volume) or variable rate (interest) tenders. In a fixed rate tender, the ECB specifies the interest rate in advance and participating counterparties bid the amount of money they want to transact at the fixed interest rate. 86 In a variable rate tender, counterparties bid the amounts of money and the interest rates at which they want to enter into transactions with the Bank Tender Operations Calendar Main and Longer-Term Refinancing Operations The main and longer-term refinancing operations are executed according to an indicative annual calendar published by the Eurosystem. 88 The calendar is published at least three months before the start of the year for which it is valid. The normal trade days for the main and the longer-term refinancing operations are specified in Box 9. The ECB aims to ensure that counterparties in all Member States can participate in the main and longer-term refinancing operations. Therefore, when compiling the calendar for these operations, the ECB made appropriate adjustments to the normal schedule so as to take into account national bank holidays in the individual Member States. Box 9: Normal Trade Days for the Main and the Longer-Term Refinancing Operations Type of operation Normal trade day Main refinancing operations Each Tuesday Longer-term refinancing operations The last Wednesday of each calendar month 1 1. Owing to the Christmas period, the December operation is brought forward, normally by one week, i.e. to the preceding Wednesday of the month. 86 In fixed rate foreign exchange swap tenders, the ECB fixes the swap points of the operation and the counterparties offer the amount of currency kept as fixed that they wish to sell (and buy back) or buy (and sell back) at that rate. 87 In variable rate foreign exchange swap tenders, the counterparties bid the amount of the currency kept as fixed and the swap point quotation at which they wish to enter into the operation. 88 The calendar for the Eurosystem tender operations is on the ECB s website (

80 Structural Operations Structural operations through standard tenders are not executed according to any prespecified calendar. However, they are normally conducted and settled only on days on which all NCBs are open for conducting Eurosystem monetary policy operations. Fine-Tuning Operations Fine-tuning operations are not executed according to any pre-specified calendar. The ECB may decide to conduct fine-tuning operations on any day which is a Eurosystem Business Day in at least one Member State. 6.3 Announcement of Tender Operations Eurosystem standard tenders are publicly announced by means of wire services and the ECB s website. The public tender announcement message normally contains the following information: i) the reference number of the tender operation; ii) the date of the tender operation; iii) iv) the type of operation (provision or absorption of liquidity and the type of monetary policy instrument to be used); the maturity of the operation; v) the type of auction (fixed rate or variable rate tender); vi) vii) viii) ix) the method of allotment single or multiple rate; the intended operation volume (normally only in the case of the longer-term refinancing operations); the fixed tender interest rate/price/swap point (only in the case of fixed rate tenders); the minimum/maximum accepted interest rate/price/swap point (if applicable); x) the start date and the maturity date of the operation (if applicable) or the value date and maturity date of the instrument (only in the case of the issuance of ECB debt certificates); xi) xii) xiii) xiv) the currencies involved and the currency, the amount of which is kept fixed (only in the case of foreign exchange swaps); the reference spot exchange rate to be used for the calculation of bids (only in the case of foreign exchange swaps); the maximum bid limit (if any); the minimum individual allotment amount (if any); 78

81 xv) xvi) the minimum allotment ratio (if any); the time schedule for the submission of bids; xvii the denomination of the certificates (in the case of the issuance of ECB debt certificates); and xviii) the ISIN code of the issue (only in the case of the issuance of ECB debt certificates). The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. BIDDING/SETTLEMENT PROCEDURE FOR EUROSYSTEM MAIN REFINANCING OPERATION STANDARD TENDER Monday 2.30 p.m. Tender announcement by ECB Tuesday 8.30 a.m. Deadline for Counterparty submission of bids a.m. Announcement of tender result by ECB a.m. Certification of individual allotment results by the Bank Wednesday Settlement BIDDING/SETTLEMENT PROCEDURE FOR EUROSYSTEM LONGER-TERM REFINANCING OPERATION STANDARD TENDER Tuesday 2.30 p.m. Tender announcement by ECB Wednesday 8.30 a.m. Deadline for Counterparty submission of bids a.m. Announcement of tender result by ECB a.m. Certification of individual allotment results by the Bank Thursday Settlement BIDDING/SETTLEMENT PROCEDURE FOR EUROSYSTEM FINE-TUNING OPERATION FIXED-TERM DEPOSITS QUICK TENDER Minutes 0 Tender Announcement from the ECB +25 (25) Deadline for Counterparty submission of bids +35 (60) Announcement of tender result by ECB +10 (70) Certification of individual allotment results by the Bank Settlement Same day With a view to enhancing transparency in its fine-tuning operations, the Eurosystem normally announces quick tenders publicly in advance as outlined above. However, under exceptional circumstances, the ECB may decide not to announce such tenders publicly in advance. The announcement of quick tenders follows the same procedures as for standard tenders. In a quick tender, which is not announced publicly in advance, the selected counterparties are

82 contacted directly by the Bank. In a quick tender, which is announced publicly, the Bank may contact the selected counterparties directly. 6.4 Counterparties Preparation and Submission of Tender Bids Counterparties tender bids must be in a form that follows the pro forma example provided by the Bank for the relevant operation (see Annex 1). The tender bids of an institution may only be submitted by one establishment (either the head office or a designated branch) in each Member State. In fixed rate tenders, counterparties shall state in their bids the amount of money that they are willing to transact with the Bank along with the specified interest rate. 89 (See Annexes 1 and 2.) In variable rate tenders, counterparties may submit bids for up to ten different interest rate/price/swap point levels. In exceptional circumstances the Eurosystem may impose a limit on the number of bids that may be submitted as regards variable rate tenders. In each bid they shall state the amount of money that they are willing to transact with the Bank, and the 90, 91 respective interest rate. The interest rates bid must be a multiple of 0.01 percentage points. In case of a variable rate foreign exchange swap tender, the swap points are to be quoted according to standard market conventions and bids must be a multiple of 0.01 swap points. For the main refinancing operations, the minimum bid amount is 1,000,000. Bids exceeding this amount must be expressed as multiples of 100,000. The same minimum bid and multiple amounts are applied in fine-tuning and structural operations. The minimum bid amount is applied to each individual interest rate/price/swap point level. For the longer-term refinancing operations, the Bank s minimum bid amount is 1,000,000. Bids exceeding the defined minimum bid amount must be expressed as multiples of 10,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Any maximum bid limit is always specified in the public tender announcement message. Counterparties are expected always to be in a position to cover amounts allotted to them by a sufficient amount of eligible underlying assets. 92 If a counterparty fails to transfer a sufficient 89 In fixed rate foreign exchange swaps, the amount of the currency kept fixed that the counterparty is willing to transact with the Bank is to be stated. 90 With regard to the issuance of ECB debt certificates, the ECB may decide that bids are to be expressed in the form of a price rather than an interest rate. In this case, prices shall be quoted as a percentage of the nominal amount. 91 In variable rate foreign exchange swaps, the amount of the currency kept fixed that the counterparty is willing to transact with the Bank and the respective swap point level are to be stated. 92 Or to settle in cash in the case of liquidity-absorbing operations. 80

83 amount of underlying assets or cash to settle the amount it has been allotted in a tender operation, the Bank may impose sanctions. Bids are revocable up to the tender submission deadline. Bids submitted after the deadline specified in the tender announcement message are invalid. The Bank judges respect of the deadline. The Bank discards all the bids of a counterparty if the aggregate amount bid exceeds any maximum bid limit established by the ECB. The Bank also discards any bid which is below the minimum bid amount or which is below any minimum or above any maximum accepted interest rate/price/swap point. Furthermore, the Bank may discard bids which are incomplete or which do not follow the pro forma example. If a bid is discarded, the Bank informs the counterparty about its decision prior to the tender allotment. 6.5 Tender Allotment Procedures Fixed Rate Tender Operations In the allotment of a fixed rate tender, the bids received from counterparties are added together. If the aggregate amount bid exceeds the total amount of liquidity to be allotted, the submitted bids will be satisfied pro rata, according to the ratio of the amount to be allotted to the aggregate bid amount. The amount allotted to each counterparty is rounded to the nearest euro. However, the ECB may decide to allot a minimum amount/ratio to each bidder in fixed rate tenders. Variable Rate Tenders in Euro In the allotment of liquidity-providing variable rate tenders, bids are listed in diminishing order of offered interest rates. Bids with the highest interest rate levels are satisfied first and bids with successively lower interest rates are accepted until the total liquidity to be allotted is exhausted. If, at the lowest interest rate level accepted (i.e. the marginal interest rate), the aggregate amount bid exceeds the remaining amount to be allotted, the remaining amount is allocated pro rata among the bids according to the ratio of the remaining amount to be allotted to the total amount bid at the marginal interest rate (see Annex 2). The amount allotted to each counterparty is rounded to the nearest euro. In the allotment of liquidity-absorbing variable rate tenders (which may be used for the issuance of ECB debt certificates and the collection of fixed-term deposits), bids are listed in increasing order of offered interest rates (or diminishing order of offered prices). Bids with the lowest interest rate (highest price) levels are satisfied first and successively higher interest rate bids (lower price bids) are accepted until the total liquidity to be absorbed is exhausted. If, at the highest interest rate (lowest price) level accepted (i.e. the marginal interest rate/price), the aggregate bid amount exceeds the remaining amount to be allotted, the remaining amount is allocated pro rata among the bids according to the ratio of the remaining amount to be allotted to the total bid amount at the marginal interest rate/price (see Annex 2). For the issuance of ECB debt certificates, the amount allotted to each counterparty is rounded to the nearest multiple of the denomination of the ECB debt certificates. For other liquidityabsorbing operations, the amount allotted to each counterparty is rounded to the nearest euro.

84 The ECB may decide to allot a minimum amount to each successful bidder in variable rate tenders. Variable Rate Foreign Exchange Swap Tenders In the allotment of liquidity-providing variable rate foreign exchange swap tenders, bids are listed in increasing order of swap point quotations. 93 The bids with the lowest swap point quotations are satisfied first and successively higher swap point quotations are accepted until the total amount of the fixed currency to be allotted is exhausted. If, at the highest swap point quotation accepted (i.e. the marginal swap point quotation), the aggregate bid amount exceeds the remaining amount to be allotted, the remaining amount is allocated pro rata among the bids according to the ratio of the remaining allotted amount to the total bid amount at the marginal swap point quotation (see Annex 2). The amount allotted to each counterparty is rounded to the nearest euro. In the allotment of liquidity-absorbing variable rate foreign exchange swap tenders, bids are listed in diminishing order of offered swap point quotations. The bids with the highest swap point quotations are satisfied first and successively lower swap point quotations are accepted until the total amount of the fixed currency to be absorbed is exhausted. If, at the lowest swap point quotation accepted (i.e. the marginal swap point quotation), the aggregate bid amount exceeds the remaining amount to be allotted, the remaining amount is allocated pro rata among the bids according to the ratio of the remaining allotted amount to the total bid amount at the marginal swap point quotation (see Annex 2). The amount allotted to each counterparty is rounded to the nearest euro. Type of Auction For variable rate tenders, the Eurosystem may apply either single rate or multiple rate auction procedures. In a single rate auction (Dutch auction), the allotment interest rate/price/swap point applied to all satisfied bids is equal to the marginal interest rate/price/swap point (i.e. the interest rate/price/swap point at which the total allotment was exhausted). In a multiple rate auction (American auction), the allotment interest rate/price/swap point is equal to the interest rate/price/swap point offered for each individual bid. 93 Swap point quotations are listed in increasing order taking into account the sign of the quotation, which depends on the sign of the interest-rate differential between the foreign currency and the euro. If, for the maturity of the swap operation, the foreign-currency interest rate is higher than the corresponding interest rate for the euro, the swap point quotation is positive (i.e. the euro is quoted at a premium to the foreign currency). Conversely, if the foreign-currency interest rate is lower than the corresponding interest rate for the euro, the swap point quotation is negative (i.e. the euro is quoted at a discount to the foreign currency). 82

85 6.6 Announcement of Tender Results The results of standard and quick tenders are announced publicly by means of wire services and the ECB s website. The public tender result message normally contains the following information: i) the reference number of the tender operation; ii) iii) iv) the date of the tender operation; the type of operation; the maturity of the operation; v) the total amount bid by Eurosystem counterparties; vi) vii) viii) ix) the number of bidders; the currencies involved (in the case of foreign exchange swaps); the total amount allotted; the percentage of allotment (in the case of fixed rate tenders); x) the spot exchange rate (in the case of foreign exchange swaps); xi) xii) xiii) xiv) xv) xvi) xvii) the marginal interest rate/price/swap point accepted and the percentage of allotment at the marginal interest rate/price/swap point (in the case of variable rate tenders); the minimum bid rate, maximum bid rate and weighted average allotment rate (in the case of multiple rate auctions); the start date and the maturity date of the operation (if applicable) or the value date and maturity date of the instrument (in the case of the issuance of ECB debt certificates); the minimum individual allotment amount (if any); the minimum allotment ratio (if any); the denomination of the certificates (in the case of the issuance of ECB debt certificates); and the ISIN code of the issue (only in case of ECB debt certificates). The Bank will only directly certify the individual allotment result to successful counterparties. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information.

86 6.7 Procedures for Bilateral Operations General Considerations The Bank may execute operations on the basis of bilateral procedures. 94 These procedures may be used for fine-tuning open market operations and structural outright operations. They are defined in a broad sense as any procedures where the Eurosystem conducts a transaction with one or a few counterparties without a tender. Direct Contact with Counterparties In this procedure, the Bank directly contacts one or a few domestic counterparties, which are selected according to the criteria specified in Section 2.1. According to the precise instructions given by the ECB, the Bank decides whether to enter into a deal with the counterparties. The transactions are settled through the Bank. If the Governing Council of the ECB were to decide that, under exceptional circumstances, bilateral operations could also be executed by the ECB itself (or by one or a few national central banks acting as the operating arm of the ECB), the procedures for such operations would be adapted accordingly. In this case, the ECB (or the Bank acting as the operating arm of the ECB) would directly contact one or a few counterparties in the euro area, selected according to the criteria specified in Section 2.1. The ECB (or the Bank acting as the operating arm of the ECB) would decide whether to enter into a deal with the counterparties. The transactions would nevertheless be settled in a decentralised manner through the Bank. Bilateral operations through direct contact with counterparties can be applied for reverse transactions, outright transactions, foreign exchange swaps and the collection of fixed-term deposits. Announcement of Bilateral Operations Bilateral operations are normally not announced publicly in advance. In addition, the ECB may decide not to announce the results of bilateral operations publicly. Operating Days The ECB may decide to conduct fine-tuning bilateral operations on any day, which is a Eurosystem Business Day. The Bank will only participate in such operations on Irish Business Days. Outright bilateral operations for structural purposes are normally only conducted and settled on days which all national central banks are open for conducting Eurosystem monetary policy operations. 94 The Governing Council of the ECB will decide whether, under exceptional circumstances, fine-tuning bilateral operations may also be executed by the ECB itself. 84

87 CHAPTER 7: SETTLEMENT PROCEDURES 7.1 General Considerations Money transactions relating to the use of Eurosystem standing facilities or to the participation in open market operations are settled on the counterparties accounts with the Bank (or on the accounts of settlement banks participating in TARGET2). Money transactions are settled only after (or at the moment of) the final transfer (if necessary) of the assets underlying the operation. Provisions related to the settlement procedures are defined in the relevant legal agreement. Chapter 9 contains details of the Bank s additional legal agreements. 7.2 Settlement of Open Market Operations Open market operations based on standard tenders (i.e. main refinancing operations, longerterm refinancing operations and structural operations) are normally settled by the Bank s counterparties on the first day following the trade day on which the Bank is open. The issuance of ECB debt certificates however, is settled on the second day following the trade date on which both TARGET2 and the relevant SSSs are open. As a matter of principle, the Eurosystem aims to settle the transactions related to its open market operations at the same time in all Member States with all counterparties that have provided sufficient underlying assets. The time of settlement of the main and the longer-term refinancing operations normally coincides with the time of reimbursement of a previous operation of corresponding maturity. In order to reduce settlement risk, the Bank will normally endeavour to net the cash amounts of new and maturing operations. The Eurosystem aims to settle open market operations based on quick tenders and bilateral procedures on the trade day. However, the Eurosystem may for operational reasons occasionally apply other settlement dates for these operations, in particular for outright transactions and foreign exchange swaps (see Box 10). Box 10: Normal Settlement Dates for Eurosystem Open Market Operations 1 Monetary policy instrument Settlement date for operations based on standard tenders 2 Settlement date for operations based on quick tenders or bilateral procedures Reverse transactions T+1 T Outright transactions - According to market convention for underlying assets Issuance of ECB debt certificates T+2 - Foreign exchange swaps - T, T+1 or T+2 Collection of fixed-term deposits - T In the box, T refers to the trade day. The settlement date refers to Eurosystem Business Days. If the normal settlement date for the main or the longer-term refinancing operations coincides with a bank holiday, the ECB may decide to apply a different settlement date, with the option of same-day settlement. The settlement dates for the main and the longer-term refinancing operations are specified in advance on the Eurosystem tender operations calendar (see ECB s website: Except for the SMP liquidity absorbing FTO All trades must be confirmed by the respective back-offices in advance of their value dates.

88 7.2.1 Main Refinancing Operations Reverse Transactions The framework agreement in respect of Eurosystem operations secured over collateral pool assets to be entered into between the Bank and its counterparties (see Chapter 9), also details counterparties obligations and procedures.. The maturity date of a previous operation will usually coincide with the date of the first leg of a new operation with the net cash payment being received/paid by the Bank (see Annex 1) Longer-Term Refinancing Operations Reverse Transactions See Main Refinancing Operations Fine-Tuning Operations Reverse transactions See Main Refinancing Operations. Foreign Exchange Swaps Foreign exchange swaps comprise the simultaneous spot and forward purchase or sale of euro against foreign currency. Settlement of the euro leg of the transaction takes place by credit/debit of proceeds to/from the counterparty s settlement account while the foreign currency leg will be settled over the counterparty s correspondent accounts in the specific currency. Fixed-Term Deposits Fixed-term deposits may be executed by the Bank on its own behalf or on behalf of the ECB to absorb liquidity. They may be carried out for varying maturities, overnight and beyond. Settlement takes place on the days specified in the ECB s announcement of the deposit operation in accordance with the details set out in Box 10. On maturity, the Bank will return the funds plus the interest amount earned to the counterparty. Outright Transactions Outright transactions refer to operations where the Bank buys or sells eligible assets outright on the market. If the Bank buys eligible securities, proceeds will be paid to the counterparty upon confirmation of receipt of securities. Similarly, if the Bank sells securities, the transfer of securities from the Bank to the counterparty will take place upon receipt of funds. 86

89 7.3 End-of-Day Procedures The end-of-day procedures are specified in documentation related to TARGET2. According to these procedures, the normal closing time is 17:00. No further payment orders are accepted for processing after the closing time. Counterparties requests for access to the marginal lending facility must be submitted to the Bank before 17:15 (17:30 in the case of the last business day of the minimum reserve maintenance period). Any negative balances on the settlement accounts in TARGET2-Ireland of eligible counterparties remaining after the finalisation of the end-of-day procedures are automatically considered to be a request for recourse to the marginal lending facility (see Section 4.1). At the end of each business day, the existence of a debit position on a counterparty s settlement account with the Bank is deemed to be a request for recourse to the marginal lending facility and the amount of the debit position is automatically converted to borrowing from the marginal lending facility (see Section 4.1). Marginal Lending Facility Counterparties may use the marginal lending facility to obtain overnight liquidity from the Bank at a pre-specified interest rate against the provision of eligible assets (see Chapter 5). The facility is intended to satisfy counterparties temporary liquidity needs. Under normal circumstances, the interest rate on the facility provides a ceiling for the overnight market interest rate. The terms and conditions of the facility are identical throughout the euro area. The Bank will provide liquidity under the marginal lending facility in the form of overnightcollateralised loans. The provisions for the relevant agreements relating to the use of the marginal lending facility are set out in Chapter 9. Institutions fulfilling the general counterparty eligibility criteria specified in Chapter 2 may access the marginal lending facility. Access to the marginal lending facility is granted only on Irish business days. If at the end of the business day (17.00) a participant has used all or part of their intraday credit line in TARGET2- Ireland they can apply for a marginal lending facility (up to (17.30 in the case of the last business day of the minimum reserve maintenance period)) or the system will automatically grant a marginal lending facility up to the amount of the intraday credit line in TARGET2-Ireland used. A request by a counterparty for a drawing under the marginal lending facility may be made to the Euro Settlements section of the Payments & Securities Settlements Division of the Bank by SWIFT message (MT299) to be received by (17.30 in the case of the last business day of the minimum reserve maintenance period). No cash limit is placed on the facility to be 95 As a general rule, the closing time for TARGET2-Ireland is The deadline for requesting access to the marginal lending facility is (this deadline is postponed by an additional 15 minutes to on the last Eurosystem Business Day of a reserve maintenance period). TARGET2-Ireland closing days are announced on the Bank s website and on the ECB s website 96 See footnote 95

90 provided to counterparties although provision of the consideration is subject to the provision to the Bank of adequate collateral taking account of appropriate margins and haircuts. Notifications in respect of each drawing under the marginal lending facility are sent by the Payment Module (PM) or the Home Accounting Module (HAM) (settlement notification on an optional basis). For the automatic marginal lending only the PM account will be used since intra-day credit is not provided in the HAM. Apart from the requirement to present sufficient underlying eligible assets, no limit is specified as to the amount of funds that can be advanced under the marginal lending facility. The maturity of credit extended under the marginal lending facility is overnight. Credit is to be repaid at the opening of TARGET2-Ireland and the securities settlement systems (SSSs) on the following Irish business day. The interest rate is announced in advance by the Bank and is calculated as a simple interest rate with the day-count convention of actual/360. The ECB may change the interest rate at any time, with effect not earlier than the following Eurosystem Business Day. 97 Interest under the marginal lending facility is payable with the repayment of the credit. Access to the marginal lending facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time. Deposit Facility Counterparties can use the deposit facility to make overnight deposits with the Bank. The deposits are remunerated at a pre-specified interest rate. Under normal circumstances, the interest rate on the facility provides a floor for the overnight market interest rate. The terms and conditions of the deposit facility are identical throughout the euro area. No collateral is given to counterparties in exchange for the deposits. Institutions fulfilling the general counterparty eligibility criteria specified in Chapter 2 may access the deposit facility. Access to the deposit facility is granted only on Irish business days. Direct Participants and HAM account holders may access the Overnight Deposit Facility directly via the Information & Control Module (ICM). HAM account holders who do not have access to the ICM may send a request to the Euro Settlements Section of the Payments & Securities Settlements Division of the Bank at any time up to (17.15 in the case of the last business day of the minimum reserve maintenance period). Principal and interest accrued on the deposit will be paid at the start of the next business day. 97 Decisions on interest rate changes are taken by the Governing Council. These decisions are normally made when it assesses the monetary policy stance (at its first meeting of the month) and become effective only from the beginning of the next reserve maintenance period. 98 See footnote 95 88

91 The amount that a counterparty may deposit under the facility is limited to the amount in their end-of-day RTGS/HAM account. The maturity of deposits under the facility is overnight. Deposits held under the facility mature at the opening of TARGET2-Ireland on the following Irish business day and will be repaid at that stage. The interest rate is announced in advance by the Bank and is calculated as a simple interest rate with the day-count convention of actual/360. The ECB may change the interest rate at any time, with effect not earlier than the following Eurosystem Business Day. 99 Interest on the deposits is payable on maturity. Access to the facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time. 99 See footnote 97

92 CHAPTER 8: MINIMUM RESERVES The contents of this chapter are for information as the minimum reserve system is governed by Council and ECB regulations General Considerations The ECB requires credit institutions to hold minimum reserves with the Bank within the framework of the Eurosystem s minimum reserve system. The legal framework for this system is laid down in Article 19 of the Statute of the ESCB/ECB, Council Regulation (EC) No. 2531/98 of 23 November 1998 concerning the application of minimum reserves by the European Central Bank and Regulation (EC) No. 1745/2003 of the European Central Bank on the application of minimum reserves (ECB/2003/9). The terms and conditions of the Eurosystem s minimum reserve system are uniform throughout the euro area. The amount of minimum reserves to be held by each institution is determined in relation to its reserve base. The Eurosystem s minimum reserve system enables counterparties to make use of averaging provisions, implying that compliance with reserve requirements is determined on the basis of the average of the end-of-calendar-day balances on the counterparties reserve accounts over a maintenance period. Institutions holdings of required reserves are remunerated at the weighted average rate on the Eurosystem s main refinancing operations within the respective maintenance period. The Eurosystem s minimum reserve system primarily pursues the following monetary functions: i) Stabilisation of money market interest rates The averaging provision of the Eurosystem s minimum reserve system aims to contribute to the stabilisation of money market interest rates by giving institutions an incentive to smooth the effects of temporary liquidity fluctuations. ii) Creation or enlargement of a structural liquidity shortage The Eurosystem s minimum reserve system contributes to creating or enlarging a structural liquidity shortage. This may be helpful in improving the ability of the Eurosystem to operate efficiently as a supplier of liquidity. 8.2 Institutions Subject to Minimum Reserve Requirements Pursuant to Article 19.1 of the Statute of the ESCB/ECB, the ECB requires credit institutions established in Member States to hold minimum reserves. This implies that branches in the 100 See Bank website for further details ( 90

93 euro area of credit institutions not incorporated in the euro area are also subject to the Eurosystem s minimum reserve system. However, branches established outside the euro area of credit institutions incorporated in the euro area are not subject to this system. Institutions will be automatically exempt from reserve requirements from the start of the maintenance period within which their authorisation is withdrawn or surrendered, or within which a decision to submit the institution to winding-up proceedings is taken by a judicial authority or any other competent authority of a Member State. According to Council Regulation (EC) No. 2531/98 and ECB Regulation (ECB/2003/9), the ECB may also exempt institutions from their obligations under the Eurosystem s minimum reserve system on a nondiscriminatory basis if they are subject to reorganisation measures or the freezing of funds and/or other measures imposed by the EU under Article 75 of the Treaty or by a Member State restricting the use of their funds, or in respect of which the ECB s Governing Council has issued a decision suspending or excluding their access to open market operations or the Eurosystem s standing facilities, or if the purposes of the Eurosystem s minimum reserve system would not be met by imposing these obligations on those particular institutions. If its decision on any such exemption is based on the purposes of the Eurosystem s minimum reserve system, the ECB takes into account one or more of the following criteria: a) the institution is authorised to pursue special-purpose functions only; b) the institution is prohibited from exercising active banking functions in competition with other credit institutions; and/or c) the institution is under a legal obligation to have all its deposits earmarked for purposes related to regional and/or international development assistance. The ECB establishes and maintains a list of institutions subject to the Eurosystem s minimum reserve system. The list is available to the public on the Bank s website ( The ECB also publishes a list of any institutions exempt from their obligations under this system for reasons other than their being subject to reorganisation measures or the freezing of funds and/or other measures imposed by the EU under Article 75 of the Treaty or by a Member State restricting the use of their funds or in respect of which the ECB s Governing Council issued a decision suspending or excluding their access to open market operations or the Eurosystem s standing facilities. Counterparties may rely on these lists in deciding whether their liabilities are owed to another institution that is itself subject to reserve requirement. The lists available to the public after close of business on the last Eurosystem Business Day of each calendar month are valid for the calculation of the reserve base for the maintenance period beginning in the calendar month two months later. For example, the list published at the end of February would be valid for the calculation of the reserve base for the maintenance period beginning in April. 8.3 Determination of Minimum Reserves Reserve Base and Reserve Ratios The reserve base of an institution is defined in relation to elements of its balance sheet. The balance sheet data are reported to the Bank within the general framework of the ECB s money

94 and banking statistics (see Annex 5). For institutions subject to full reporting requirements, balance sheet data referring to the end of a given calendar month are used to determine the reserve base for the maintenance period starting in the calendar month two months later. For example, the reserve base calculated from the balance sheet at the end of February would be used to calculate the reserve requirements to be fulfilled by counterparties in the maintenance period beginning in April. The reporting framework for the ECB s money and banking statistics includes the possibility to relieve small institutions from some of the reporting burden. Institutions to which this provision applies only need to report a limited set of balance sheet data on a quarterly basis (as end-of-quarter data) and with a reporting deadline which is longer than that set for larger institutions. For these institutions, balance sheet data reported for a specific quarter are used to determine, with a lag of two months, the reserve base for the consecutive three reserve maintenance periods. For example, the balance sheet at the end of the first quarter March would be valid for the calculation of the reserve base for the maintenance periods beginning in June, July and August. According to Council Regulation (EC) No. 2531/98, the ECB is entitled to include liabilities resulting from the acceptance of funds together with liabilities resulting from off-balancesheet items in the reserve base of institutions. In the Eurosystem s minimum reserve system, only the liability categories deposits and debt securities issued are actually included in the reserve base (see Box 11). Liabilities vis-à-vis other institutions included in the list of institutions subject to the Eurosystem s minimum reserve system and liabilities vis-à-vis the ECB and the participating NCBs are excluded from the reserve base. In this respect, for the liability category debt securities issued the issuer needs to be able to prove the actual amount of these instruments held by other institutions subject to the Eurosystem s minimum reserve system in order to be entitled to deduct them from the reserve base. If such proof cannot be presented, issuers may apply a standardised deduction of a fixed percentage to this balance sheet item See Regulation (ECB/2003/9). Further information relating to the standardised deduction ratio can be found on the ECB s website ( Information on the latest reserve maintenance period and remuneration rate can also be found on the Bank s website ( 92

95 Box 11: Reserve Base and Reserve Ratios A. Liabilities included in the Reserve Base and to which the Positive Reserve Ratio is Applied Deposits* Overnight deposits Deposits with agreed maturity up to 2 years Deposits redeemable at notice up to 2 years Debt securities issued Debt securities with original maturity up to 2 years B. Liabilities included in the Reserve Base and to which a Zero Reserve Ratio is Applied Deposits Deposits with agreed maturity over 2 years Deposits redeemable at notice over 2 years Repos Debt securities issued Debt securities with agreed maturity over 2 years C. Liabilities excluded from the Reserve Base * Liabilities vis-à-vis other institutions subject to the Eurosystem s minimum reserve system Liabilities vis-à-vis the ECB and the national central banks Regulation (EC) No 25/2009 of the European Central Bank of 19 December 2008 concerning the balance sheet of the monetary financial institutions sector (Recast) (ECB/2008/32) (OJ L 15 of 20 January.2009, page 14) explicitly requires the reporting of deposit liabilities at nominal value. Nominal value means the amount of principal that a debtor is contractually obliged to repay to a creditor. This amendment had become necessary because Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and the consolidated accounts of banks and other financial institutions (OJ L 372 of 31 December 1986, page 1) had been amended to the effect that certain financial instruments could be priced at fair value. The reserve ratios are determined by the ECB subject to the maximum limit specified in Council Regulation (EC) No. 2531/98. The ECB applies a uniform non-zero reserve ratio to most of the items included in the reserve base. This reserve ratio is specified in Regulation ECB/2003/9. The ECB sets a zero reserve ratio on the following liability categories: deposits with an agreed maturity of over two years, deposits redeemable at notice of over two years, repos and debt securities with an original maturity of over two years (see Box 11). The ECB may at any time change reserve ratios. Changes in reserve ratios are announced by the ECB in advance of the first maintenance period for which the change is effective.

96 Calculation of Reserve Requirements The reserve requirement of each individual institution is calculated by applying, to the amount of eligible liabilities, the reserve ratios for the corresponding categories of liabilities. Lump-sum allowance: The allowance is applied to every credit institution. Each credit institution deducts a maximum lump sum designed to reduce the administrative cost of managing very small reserve requirements. Should [reserve base reserve ratio] be less than , then the lump sum allowance equals [reserve base reserve ratio]. Should [reserve base reserve ratio] be greater than or equal to , then the lump sum allowance equals Institutions allowed to report statistical data regarding their consolidated reserve base as a group (as defined in Part 2, Section 1 of Annex III to Regulation (EC) No 25/2009 (ECB/2008/32)) hold minimum reserves through one of the institutions in the group which is acting as an intermediary exclusively for these institutions. In accordance with Article 11 of Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves (ECB/2003/9) 102, in the latter case only the group as a whole is entitled to deduct the lump sum allowance. The minimum (or required ) reserves are computed as follows: Minimum (or required ) reserves = reserve base reserve ratio - lump sum allowance The reserve ratio applies in accordance with Regulation (EC) No 1745/2003 (ECB/2003/9). The reserve requirement for each maintenance period is rounded to the nearest euro. 8.4 Maintenance of Reserve Holdings Maintenance Period The ECB publishes a calendar of the reserve maintenance periods at least three months before the start of each year. 103 The maintenance period begins on the settlement day of the first main refinancing operation following the meeting of the Governing Council, at which the monthly assessment of the monetary policy stance is pre-scheduled. Under special circumstances, the published calendar may be amended, depending, among other things, on changes in the schedule of Governing Council meetings. 102 OJ L 250, , p The calendar is normally announced in an ECB press release, to be found on the ECB s website ( In addition, such a calendar is published in the Official Journal of the European Union and on the Bank s website ( 94

97 Reserve Holdings Each institution incorporated in Ireland must hold its minimum reserves on a reserve account with the Bank. 104 The daily reserve holding of an institution is calculated as the end-of-day balance on its reserve account. A resident institution may apply to the Bank for permission to hold all its minimum reserves indirectly through an intermediary. The possibility of holding minimum reserves through an intermediary is as a rule restricted to institutions which are constituted so that part of the administration (e.g. treasury management) is normally effected by the intermediary. The holding of minimum reserves through an intermediary is subject to the provisions specified in Regulation ECB/2003/9. Remuneration of Reserve Holdings Holdings of required reserves are remunerated at the average, over the maintenance period, of the ECB s rate (weighted according to the number of calendar days) on the main refinancing operations, according to the formula specified in Box 12. Reserve holdings exceeding required reserves are not remunerated. The remuneration is paid on the second Irish business day following the end of the maintenance period over which the remuneration was earned. 104 For institutions with more than one establishment in a Member State, the head office is responsible for fulfilling the aggregate minimum reserves of all the domestic establishments of the institution. If an institution has no head office in a Member State in which it is established, it has to designate a principle branch which would then be responsible for fulfilling the aggregate minimum reserve requirements of all the establishments of the institution in the relevant Member State. An institution with establishments in more than one Member State is required to hold minimum reserves with the national central bank of each Member State in which it has an establishment, in relation to its reserve base in the corresponding Member State.

98 Box 12: Calculation of the Remuneration of Holdings of Required Reserves The holding of required reserves is remunerated according to the following formula: R t H t n r t t r t n t i 1 MRi n t Where: R t = remuneration to be paid on holdings of required reserves for the maintenance period t H t = average daily holdings of required reserves for the maintenance period t n t = number of calendar days in the maintenance period t r t = rate of remuneration of holdings of required reserves for the maintenance period t. Standard rounding of the remuneration rate to two decimals shall be applied. i = ith calendar day of the maintenance period t MR i = marginal interest rate of the most recent main refinancing operation settled on or before calendar day i. 8.5 Reporting, Acknowledgement and Verification of the Reserve Base The reserve base items for the application of minimum reserves are calculated by the institutions subject to minimum reserves themselves and are reported to the Bank within the general framework of the ECB s money and banking statistics. Article 5 of Regulation ECB/2003/9 defines procedures for the notification and acknowledgement of the reserve base and the reserve requirement of the institution. The procedure for the notification and acknowledgement of an institution s minimum reserve requirement is as follows. The institution calculates its reserve requirement for each maintenance period and notifies the Bank at the same time as it submits the relevant month s balance sheet data in the resident return. The Bank publishes a calendar of freezing dates for each maintenance period: institutions may make revisions to their reserve base, and therefore their reserve requirements, up to that date. The Bank does not acknowledge each institution s calculated reserve requirement but it is deemed to have done so by close of business on the freezing date. After that date, the institution s minimum reserve requirement for the relevant maintenance period cannot be revised. 96

99 For institutions that are allowed to act as intermediaries for indirect reserve holdings of other institutions, special reporting requirements are specified in Regulation ECB/2003/9. The holding of reserves through an intermediary does not change the statistical reporting obligations of institutions holding reserves via an intermediary. The ECB and the Bank have the right, within the scope of the Council Regulation (EC) No. 2531/98, to verify the accuracy and quality of collected data. 8.6 Non-Compliance with Minimum Reserve Obligations Non-compliance with the minimum reserve obligations arises if an institution s average end-ofcalendar-day balance on its reserve account(s) over the maintenance period is less than its reserve requirement for the corresponding maintenance period. Where an institution fails to comply with all or part of the reserve requirement, the ECB may, in accordance with the Council Regulation (EC) No. 2531/98 concerning the application of minimum reserves, impose any one of the following sanctions: i) payment of up to 5 percentage points above the marginal lending rate applied to the amount of reserve requirement which the relevant institution failed to provide; or ii) iii) a payment of up to two times the marginal lending rate, applied to the amount of the reserve requirement which the relevant institution failed to provide; or the requirement for the relevant institution to establish non-interest-bearing deposits with the ECB or the Bank up to 3 times the amount of the reserve requirement which the relevant institution failed to provide. The maturity of the deposit may not exceed the period during which the institution failed to comply with the reserve requirement. Where an institution fails to comply with other obligations under ECB regulations and decisions related to the Eurosystem minimum reserve system (e.g. if relevant data are not transmitted in time or are not accurate), the ECB is empowered to impose sanctions in accordance with Council Regulation (EC) No. 2532/98 of 23 November 1998 concerning the powers of the European Central Bank to impose sanctions and the ECB Regulation of 23 September 1999 on the powers of the ECB to impose sanctions (ECB/1999/4). The Executive Board of the ECB may specify and publish the criteria according to which it will apply the sanctions provided for in Article 7(1) of Council Regulation (EC) No. 2531/98 of 23 November 1998 on the application of minimum reserves by the ECB. In addition, in the case of serious infringements of the minimum reserve requirements, the Eurosystem may suspend counterparties participation in open market operations.

100 CHAPTER 9: ADDITIONAL LEGAL AGREEMENTS This chapter contains the specific legal agreements that must be signed by counterparties who wish to conduct certain Eurosystem credit operations with the Bank. The chapter has three sections: section 9.1 contains the framework agreement in respect of Eurosystem operations secured over collateral pool assets (including, a deed of charge in the annex thereto) Section 9.2 contains the Framework Agreement for the use of MBPNs and associated schedules (including, in Schedule 5, a Deed of Charge). Section 9.3 contains the master substitution agreement in respect of Eurosystem operations. If at any time any legal agreement set out in this Chapter or any transaction documentation, or transaction thereunder pursuant to which any Eurosystem Operation Liquidity is allotted or otherwise received is not in full compliance with the then applicable risk control procedures of the Bank (as the same may have been amended to ensure compliance with applicable Eurosystem requirements), the Counterparty shall on the request of the Bank and at its own cost, enter into such documentation and do such acts and things as the Bank shall reasonably require in order to ensure that such transaction and transaction documentation complies in all respects with such risk control procedures. 98

101 9.1 Framework Agreement in respect of Eurosystem Operations secured over Collateral Pool Assets THIS FRAMEWORK AGREEMENT is made the day of 2014, BETWEEN: (1) [COUNTERPARTY] of [specify] (the Counterparty ); and (2) CENTRAL BANK OF IRELAND of PO Box 559, Dame Street, Dublin 2 (the Bank ) WHEREAS: (A) (B) (C) The Counterparty may from time to time incur Relevant Eurosystem Obligations (as hereinafter defined). The Counterparty will, pursuant to the Deeds of Charge (as hereinafter defined) create security over certain assets satisfying the Eligibility Criteria (as hereinafter defined) in order to secure Relevant Eurosystem Obligations. This Agreement shall supersede and replace any Relevant Existing Agreement(s) (as hereinafter defined) on the terms set out herein. IT IS HEREBY AGREED as follows: 1. Definitions 1.1. In this Agreement, unless the contrary intention appears, the following definitions shall have the following meanings: this Agreement means this Framework Agreement; Accelerated LPA means, in respect of any Partially Accelerated OEM Operation and Optional Early Maturity Date, the amount of the Liquidity Provided Amount the subject of that Optional Early Maturity Date; Aggregate Liquidity Provided Amount means, on any day, the aggregate of the Liquidity Provided Amount at that time in respect of all Relevant Eurosystem Operations outstanding at close of business on the immediately preceding Business Day, together with interest accrued thereon up to close of business on that immediately preceding Business Day; Business Day means any day on which the Bank is open for conducting Eurosystem monetary policy operations; this will be any day other than Saturdays, Sundays, New Year s Day, Good Friday, Easter Monday, 1 May, Christmas Day and 26 December and any other days as notified by the Bank to the Counterparty from time to time; CCA Related Operation has the meaning given to it in clause 19.2(b)(ii); CCB has the meaning given to it in the MPIPs Document;

102 CCBM has the meaning given to it in the MPIPs Document; CCBM Collateral Assets means Other Collateral Pool Assets the subject of CCBM Security; CCBM Collateral Deeds means Collateral Pool Credit Claim Collateral Deeds relating to credit claims that are CCBM Collateral Assets; CCBM Requirements means, at any time, all conditions and requirements applicable at that time to the mobilisation of collateral for Eurosystem Operations through the CCBM, whether or not such conditions or requirements are publicly available; CCBM Security means any Security created by the Counterparty through the CCBM for the benefit of the Bank, as the Participating NCB of the Participating Member State in which the Counterparty is established; CCBM Security Document has the meaning given to it in the definition of Deed of Charge ; Collateral Pool means, at any time, the Eligible Collateral Assets that, at that time, are segregated other than, for the avoidance of doubt, any thereof comprising Collateral Pool Credit Claims that, at such time, have been redeemed or otherwise discharged in the ordinary course of business of the Counterparty; Collateral Pool Assets means at any time the Eligible Collateral Assets comprising the Collateral Pool; Collateral Pool Credit Claim means, at any time, a credit claim that is at such time an Other Collateral Pool Asset; Collateral Pool Credit Claim Collateral Deeds means, in respect of any Collateral Pool Credit Claim, all deeds and documents pursuant to which that Collateral Pool Credit Claim is created including those which make up the Counterparty s title to that Collateral Pool Credit Claim; Collateral Pool Schedule means, at any time (for the purposes of this definition, the relevant time ), such schedule(s), if any, as the Bank at the relevant time requires, in such format(s) or media as the Bank at the relevant time requires, setting out in respect of Other Collateral Pool Assets (excluding, for the avoidance of doubt, any Tri- Party Collateral Asset that is not a Tri-Party Scheduled Collateral Asset) at the time to which the Collateral Pool Schedule relates the information in respect thereof as the Bank at the relevant time specifies, which requirements and specifications shall be as set out in the MPIPs Document at the relevant time, as the same may at the relevant time have been amended by notice from the Bank to the Counterparty or supplemented by guidance issued by the Bank to the Counterparty; Confirmation has the meaning given to it in clause 2.2(a) as supplemented by clauses 2.7 and 2.8; 100

103 Counterparty Collateral Account means the records maintained in the books and records of the Bank in respect of the Counterparty recording the segregation and desegregation of Collateral Pool Assets comprising marketable assets and cash denominated in euro (including such cash representing Fixed-Term Deposits) excluding any thereof comprising Other Tri-Party Collateral Assets. Reference to the Counterparty Collateral Account shall include any renewal, re-designation, reinstatement or modification thereof; Counterparty Collateral Account Assets means at any time the Collateral Pool Assets comprising present and future rights, title, interest, claims and benefits of the Counterparty at that time in and to, or in connection with: (a) (b) the Counterparty Collateral Account; and all Eligible Collateral Assets standing to the credit of the Counterparty Collateral Account from time to time; Counterparty Collateral Account Balance means at any time the Counterparty Collateral Account Cash Balance and the Counterparty Collateral Account Marketable Assets Balance at such time; Counterparty Collateral Account Cash Balance means at any time the aggregate of all cash denominated in euro standing to the credit of the Counterparty Collateral Account (including interest accrued thereon and credited to that account, if any), at such time and the debt and obligations represented thereby and all rights, claims and benefits of the Counterparty therein; Counterparty Collateral Account Marketable Asset has the meaning given to it in the definition of Counterparty Collateral Account Marketable Assets Balance ; Counterparty Collateral Account Marketable Assets Balance means at any time the marketable assets standing to the credit of the Counterparty Collateral Account at such time and the obligations represented thereby and all rights, claims and benefits of the Counterparty therein and each such marketable asset and the related such obligations, rights, claims and benefits a Counterparty Collateral Account Marketable Asset ; Counterparty Jurisdiction means the jurisdiction in which the Counterparty is incorporated, as identified with its name below; credit claim means, at any time, a credit claim, within the meaning of the MPIPs Document, that fulfils the Eligibility Criteria for such credit claims; Credit Claims Advance means an advance from the Bank to the Counterparty that is governed by the terms of the MPIPs Document as supplemented by the Credit Claims Letter; Credit Claims Letter has the meaning given to it in the definition of Relevant Existing Agreement; DCA Related Operation has the meaning given to it in clause 19.2(c)(ii);

104 Deed of Charge means each deed of charge or other security document (howsoever described or executed): (a) (b) (c) in the form set out in the Appendix or in such other form(s) as may be required from time to time by the Bank; in respect of Security created over Collateral Pool Assets that, at the date of this Agreement, are not Eligible Collateral Assets, in such form as may be notified by the Bank to the Counterparty on or after their becoming Eligible Collateral Assets; or in respect of any CCBM Security (a CCBM Security Document ), entered into by the Counterparty and Deeds of Charge means all of them; Delegate means any delegate, agent, manager, attorney, co-trustee or other professional advisers and contractors appointed by the Bank (including, in each case, its employees and agents); Deposit-Collateralised Advance means a Relevant Advance within the meaning of Deposit-Collateralised Advance Letter; Deposit-Collateralised Advance Letter has the meaning given to it in the definition of Relevant Existing Agreement; Depository means at any time a securities settlement system eligible at that time for the transfer of marketable assets in connection with Eurosystem Operations; desegregated in relation to a Collateral Pool Asset that had been segregated, means that the conditions for its segregation cease to be satisfied and desegregate and desegregation shall be constructed accordingly; Distributions means, with respect to any Counterparty Collateral Account Asset, all principal, interest and other payments and distributions of cash or other assets with respect to that Counterparty Collateral Account Asset; Effective Date means 26 May 2014 or such later date as may be notified by the Bank to the Counterparty; Eligibility Criteria means at any time and in respect of any Eligible Collateral Asset the eligibility criteria for an Eligible Collateral Asset of that type as set out in the MPIPs Document as the same may from time to time be amended by notice from the Bank to the Counterparty or supplemented by guidance issued by the Bank to the Counterparty; Eligible Collateral Assets means at any time any assets other than Mortgage-Backed Promissory Notes identified in the MPIPs Document as eligible as collateral for Eurosystem Operations at that time and which, for the avoidance of doubt, satisfy the Eligibility Criteria relevant thereto. As at the date of this Agreement, Eligible Collateral 102

105 Assets comprise marketable assets, credit claims and, to the extent that it satisfies the applicable Eligibility Criteria, cash; Encumbrance means any mortgage, sub-mortgage, charge (whether legal or equitable), sub-charge (whether legal or equitable), pledge, lien, encumbrance, hypothecation, assignment by way of security, right of set-off or other security interest of any kind whatsoever or any agreement, trust or arrangement having the effect (economic or otherwise) of providing any security interest or any other type of preferential arrangement (including title transfer and retention arrangements) having a similar effect; Enforcement Date means, in respect of any Security, the date on which the Bank declares that security to be enforceable in accordance with clause 9.3; an equivalent asset, in respect of any marketable asset (including, for the avoidance of doubt, any eligible market asset), means an asset that is: (a) (b) (c) of the same issuer; part of the same issue; and of an identical type, nominal value, description and (except where otherwise stated) amount as that marketable asset, provided that: (i) (ii) (iii) an asset will be equivalent to a marketable asset notwithstanding that such asset has been redenominated into euro or that the nominal value of that asset has changed in connection with such redenomination; and where a marketable asset has been converted, subdivided or consolidated or has become the subject of a takeover or the holders of a marketable asset have become entitled to receive or acquire other assets or the marketable asset has become subject to any similar event other than a payment or repayment of principal in respect of the relevant marketable asset, an equivalent asset shall mean an asset equivalent (within the meaning of this definition other than the proviso) to the original marketable asset together with or replaced by an amount of cash or other assets equivalent (within the meaning of this definition other than the proviso) to that receivable by holders of such original marketable asset resulting from such event; and if and to the extent that such marketable asset has been redeemed, the expression shall mean an amount of cash equivalent to the proceeds of the redemption, and, in respect of an amount of cash, means the same amount of cash in the same currency; euro means the single currency of participating member states of the European Union introduced on 1 January 1999; euro equivalent means, on any date and in relation to an amount expressed or denominated in another currency, the equivalent thereof in euro converted at the euro

106 reference exchange rate indicated by the European Central Bank on the Business Day before that date; Eurosystem means the European Central Bank and the Participating NCBs; Eurosystem Operation means an operation that comes into effect between the Counterparty and the Bank when: (a) (b) (c) a bid by the Counterparty in a tender procedure (as described in the MPIPs Document) is accepted; or the Counterparty avails of the credit line facility for intraday credit in TARGET2- Ireland; or the Counterparty makes a drawing on an overnight basis under the Marginal Lending Facility, or any other Eurosystem credit operation within the meaning of the MPIPs Document, in each case between the Counterparty and the Bank; Events of Default means the events of default set out in clause 9 and any one an Event of Default ; Finance Documents means each of this Agreement, each Confirmation, the Deeds of Charge, the MPIPs Document and the TARGET2 Agreement (in the case of each of the MPIPs Document and the TARGET2 Agreement, insofar as it relates to the arrangements the subject of this Agreement) and any other document agreed in writing by the parties, or designated by the Bank by notice to the Counterparty, as a Finance Document; Fixed-Term Deposit means a fixed-term deposit, within the meaning of the MPIPs Document, placed by the Counterparty with the Bank; Liquidity Provided Amount means, at any time in respect of any Relevant Eurosystem Operation, the amount of liquidity the Counterparty has been allotted or otherwise received in such Relevant Eurosystem Operation as the same may previously have been reduced pursuant to clauses 2.7 and 2.8; Liquidity Value shall have the meaning given to it in clause 5.1; Marginal Lending Facility means the standing facility of the Bank designated as such pursuant to which certain counterparties of the Bank may receive overnight credit against a pre-specified interest rate; marketable asset means, at any time, a marketable asset, within the meaning of the MPIPs Document, that fulfils the Eligibility Criteria for such marketable assets; Maturity Date means, in respect of any Relevant Eurosystem Operation, the earlier of the scheduled maturity date thereof (within the meaning of the MPIPs Document) 104

107 and (where relevant) any Optional Early Maturity Date or Substitution Early Maturity Date designated in respect of all, but not part only, of the Liquidity Provided Amount; Mortgage-Backed Promissory Note means a retail mortgage backed debt instrument issued by the Counterparty to the Bank, regardless of whether the Bank is the holder thereof, in connection with all or part of one or more Eurosystem Operations; MPIPs Document means, at any time, the Bank s Documentation on Monetary Policy Instruments and Procedures, as amended, supplemented or replaced at that time, (the Bank Document ) together with any Decision of the Governing Council of the European Central Bank that, at that time: (a) (b) (c) relates to the arrangements the subject of the Bank Document; has effect; and is not reflected by the terms of the Bank Document, on the basis that, in the event of a conflict at that time between the Bank Document and any such Decision, such Decision shall prevail; MRA has the meaning given to it in the definition of Relevant Existing Agreement ; Nominal Value shall have the meaning given to it in clause 5.1; Non-Compliant Collateral Pool Asset has the meaning given to it in clause 5.6; OEM Operation means at any time a Relevant Eurosystem Operation the terms of which at that time afford to the Counterparty the right to designate an optional early maturity date (any date so designated in accordance with those terms being an Optional Early Maturity Date ), whether in respect of all or part of the Liquidity Provided Amount in respect thereof; Other Collateral Pool Assets means at any time the Collateral Pool Assets at that time that are not Counterparty Collateral Account Assets and which, for the avoidance of doubt, shall comprise all: (a) (b) (c) Collateral Pool Credit Claims; CCBM Collateral Assets; and other Eligible Collateral Assets from time to time that are not Counterparty Collateral Account Assets and are segregated in accordance with the terms of this Agreement so as to form part of the Collateral Pool (including Other Tri- Party Collateral Assets), at that time; Other Deed of Charge means any deed of charge from time to time issued for the benefit of the holders of Mortgage-Backed Promissory Notes or any class of them pursuant to which the secured obligations are limited to the Counterparty s

108 obligations in respect of and/or in connection with Mortgage-Backed Promissory Notes or any class of them; Other Tri-Party Collateral Assets means Tri-Party Collateral Assets that are not Tri- Party Counterparty Collateral Account Assets; Optional Early Maturity Date has the meaning given to it in the definition of OEM Operation; Partially Accelerated OEM Operation means an OEM Operation in respect of which an Optional Early Maturity Date has been designated in respect of part, only, of the Liquidity Provided Amount the subject thereof; Participating Member States means the European Union Member States which have adopted the single currency in accordance with the Treaty on the Functioning of the European Union and Participating Member State means any of them; Participating NCBs means the national central banks of the Participating Member States; parties means the Bank and the Counterparty as the parties to this Agreement and party shall be construed accordingly; Related Operation means a Repo Related Operation, a CCA Related Operation or a DCA Related Operation; Relevant Eurosystem Obligations means all obligations and liabilities whether actual or contingent which are now or shall hereafter become due owing or incurred to the Bank by the Counterparty (either alone or jointly with any other person and whether as principal or surety) in whatsoever currency denominated whether on any account or otherwise in any manner whatsoever, in connection with Relevant Eurosystem Operations; Relevant Eurosystem Operation means a Eurosystem Operation that is not represented by a Mortgage-Backed Promissory Note or, where a Eurosystem Operation is represented in part, only, by a Mortgage-Backed Promissory Note, that part of the Eurosystem Operation that is not represented by a Mortgage-Backed Promissory Note; Relevant Existing Agreement means any of the following that is in effect between the Bank and the Counterparty immediately prior to the Effective Date: (a) (b) Master Repurchase Agreement in respect of Eurosystem Operations including, for the avoidance of doubt, the Operating Procedures referred to therein (the MRA ); Letter Agreement in Relation to the Mobilisation of Credit Claims (the Credit Claims Letter ) and any Deed of Charge as defined therein; 106

109 (c) (d) (e) letter agreement in respect of Eurosystem credit operations and eurodenominated cash deposits as eligible assets for the purposes of the Eurosystem s single framework for eligible assets common to all Eurosystem credit operations (a Deposit-Collateralised Advance Letter ); Master Substitution Agreement relating to any of the foregoing (each a Master Substitution Agreement ); and Deed of Floating Charge over Eligible Securities for Liabilities arising in TARGET2- Ireland (the TARGET2 Securities Charge ); Relevant Existing Liquidity Provided Amount means, at any time in respect of any Relevant Existing Operation, the amount of liquidity allotted to or otherwise received by the Counterparty pursuant to the Relevant Existing Operation; Relevant Existing Operation means, in respect of any Relevant Existing Transaction, the Eurosystem Operation that is represented thereby or, where a Eurosystem Operation is represented in part, only, thereby, that part of the Eurosystem Operation that is represented thereby; Relevant Existing Transaction means any of the following that is in effect between the Bank and the Counterparty immediately prior to the Effective Date: (a) (b) (c) a Repo; a Credit Claims Advance; and a Deposit-Collateralised Advance; Relevant Rate means the rate per annum which is 2.5% in excess of the rate applicable to the Marginal Lending Facility; Repo means a repurchase transaction transacted between the Bank, as Buyer, and the Counterparty, as Seller, under the MRA; Repo Related Operation has the meaning given to it in clause 19.2(a)(iii); Security means the security from time to time constituted by or pursuant to the Deeds of Charge and, in respect of any: (a) (b) specific Deed of Charge, the security from time to time constituted by or pursuant to that Deed of Charge; and specific Collateral Pool Asset, the security from time to time constituted by or pursuant to any of the Deeds of Charge in, over and to that Collateral Pool Asset, and, in each case, each and every part thereof; segregated in relation to a Collateral Pool Asset that is a: (a) Counterparty Collateral Account Asset (including, for the avoidance of doubt, any Counterparty Collateral Account Asset comprising Distributions) means, subject to paragraph (d) below if it is a Tri-Party Counterparty Collateral Account

110 Asset, that such Collateral Pool Asset is credited to the Counterparty Collateral Account; (b) (c) (d) (e) Collateral Pool Credit Claim means, subject to paragraph (c) below if it is a CCBM Collateral Asset, that such Collateral Pool Credit Claim has been identified in the paper and/or computer based (as may be appropriate) records of the Counterparty in such a manner as will distinguish it from all other assets of the same type as that Collateral Pool Asset legally and/or beneficially owned, or administered, by the Counterparty and in such a manner as will make it clear that such Collateral Pool Credit Claim is part of the Collateral Pool; CCBM Collateral Asset, that all CCBM Requirements notified to the Counterparty by the Bank or the relevant CCB as applicable to the cross-border mobilisation of that CCBM Collateral Asset as collateral for Eurosystem Operations have been satisfied; Tri-Party Collateral Asset, that all Tri-Party Requirements notified to the Counterparty by the Bank or, in the case of a Tri-Party CCBM Collateral Asset, the relevant CCB as applicable to the cross-border mobilisation of that Tri-Party Collateral Asset as collateral for Eurosystem Operations have been satisfied; and Collateral Pool Asset of a type that, at the date of this Agreement, is not an Eligible Collateral Asset, will have such meaning as may be notified by the Bank to the Counterparty on or after its becoming an Eligible Collateral Asset, and segregate and segregation shall be constructed accordingly; Settlement Account means an account held by the Counterparty with the Bank for the purposes of processing payments in TARGET2-Ireland or, where no such account has been opened, such an account in the name of another entity (a Third Party ) with the Bank as the Counterparty may nominate subject always to the agreement of the Bank and the relevant Third Party to its designation as such; Subsidiary means, in respect of any entity, an entity that is a subsidiary, within the meaning of section 155 of the Companies Act 1963, or a subsidiary undertaking, within the meaning of the European Communities (Companies: Group Accounts) Regulations 1992, of that entity; Substitution Accelerated LPA means, in respect of any Substitution Partially Accelerated Relevant Eurosystem Operation and Substitution Early Maturity Date, the amount of the Liquidity Provided Amount the subject of that Substitution Early Maturity Date; Substitution Early Maturity Date has the meaning given to it in clause 2.8; Substitution Partially Accelerated Relevant Eurosystem Operation means a Relevant Eurosystem Operation in respect of which a Substitution Early Maturity Date has been designated in respect of part, only, of the Liquidity Provided Amount specified therein; 108

111 Successor in relation to any person means an assignee or successor in title of such person or any person who, under the laws of that first mentioned person s jurisdiction of incorporation or domicile, has assumed the rights and obligations of such first mentioned person or to whom under such laws the same have been transferred; Syndicated Facility in respect of any Collateral Pool Credit Claim at any time means that it is advanced pursuant to a facility under which there is, at that time, more than one lender; TARGET2 means the Trans-European Automated Real-time Gross settlement Express Transfer system as defined in Guideline of the European Central Bank of 26 April 2007 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) (ECB/2007/2); TARGET2-Ireland means the real-time gross settlement system of the Bank that forms part of TARGET2; TARGET2 Agreement means any documentation between the parties governing the Counterparty s participation in TARGET2-Ireland including, at the date of this Agreement, any agreement incorporating the Bank s Terms and Conditions for participation in TARGET2-Ireland and any Deed of Floating Charge over Credit Balances on Payments Module Accounts, each between the Bank and the Counterparty; TARGET2 Securities Charge has the meaning given to it in the definition of Relevant Existing Agreement ; Third Party has the meaning given to it in the definition of Settlement Account; Tri-Party Arrangements means, at any time and in respect of any Tri-Party Collateral Asset or Eligible Collateral Asset that, if it was segregated, would be a Tri-Party Collateral Asset, the arrangements at such time between: (a) the Counterparty and either: (i) (ii) the Bank; or in the case of a Tri-Party CCBM Collateral Asset or Eligible Collateral Asset that, if it was segregated, would be a Tri-Party CCBM Collateral Asset, the relevant CCB, and a third party provider of services to: (A) (B) the Bank or CCB, as applicable; and the Counterparty, in respect of the mobilisation referred to below (a Tri-Party Service Provider ); (b) the Bank and the Counterparty (including pursuant to the MPIPs Document); and

112 (c) in the case of a Tri-Party CCBM Collateral Asset or Eligible Collateral Asset that, if it was segregated, would be a Tri-Party CCBM Collateral Assets, the relevant CCB and the Counterparty, to facilitate the mobilisation, by the Counterparty for Eurosystem Operations, of Eligible Collateral Assets of the same type as such Tri-Party Collateral Asset or Eligible Collateral Asset, as applicable, held by a Tri-Party Service Provider; Tri-Party CCBM Collateral Assets means Tri-Party Collateral Assets that are CCBM Collateral Assets; Tri-Party Collateral Assets means Collateral Pool Assets the subject of a Tri-Party Arrangement; Tri-Party Counterparty Collateral Account Assets means Tri-Party Collateral Assets of a type that are required, pursuant to the applicable Tri-Party Arrangements, to be credited to the Counterparty Collateral Account; Tri-Party Requirements means, in respect of any Tri-Party Arrangement and at any time, all conditions and requirements applicable at that time to the mobilisation of collateral for Eurosystem Operations through a Tri-Party Arrangement of that type, whether or not such conditions or requirements are publicly available; Tri-Party Scheduled Collateral Assets means Other Tri-Party Collateral Assets information in respect of which is required, pursuant to the applicable Tri-Party Arrangements, to be included in the Collateral Pool Schedule; Tri-Party Service Provider has the meaning given to it in the definition of Tri-Party Arrangements ; and Valuation Date means the date of this Agreement and each following Business Day The headings and the contents page in this Agreement shall not affect its interpretation. Clause and Appendix headings are for ease of reference only Words denoting the singular number only shall include the plural number also and vice versa. Words denoting one gender only shall include the other gender References to clauses, paragraphs and Appendices shall, unless the context otherwise requires, be to clauses, paragraphs and Appendices in this Agreement The words hereof, hereunder, herein and similar words shall be construed as references to this Agreement as a whole and not limited to the particular clause, paragraph or provision in which the relevant reference appears. The words include or including shall be construed as meaning include without limitation or including without limitation, as applicable Reference to a company shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or 110

113 established and reference to a person shall be construed so as to include any individual, firm, company, corporation, undertaking, government, state or agency of a state, or any association or partnership (whether or not having separate legal personality) Reference to any person shall be construed so as to include its Successors and any Successor of such a Successor in accordance with their respective interests provided that reference to any party to this Agreement in its capacity as such shall include its Successors and assigns only if and to the extent that such succession or assignment is contemplated or permitted herein Reference to any statute or statutory provision shall unless otherwise stated be to a statute or statutory provision of or applicable in Ireland and shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted or any statutory instrument, order or regulation made thereunder or under any such statutory amendment, modification or re-enactment. Reference to any European Union legislative provision shall be construed as encompassing, where relevant, reference to: (a) the same as it may have been, or may from time to time be, amended, replaced or consolidated; (b) any legislative provision amending, replacing or consolidating such provision; and/or (c) any legislative provision, order or regulation implementing such provision or made thereunder Reference to any document (including, for the avoidance of doubt, the MPIPs Document) shall include reference to such document as varied, supplemented, novated or replaced from time to time Reference to any cost, charge, expense, fee or disbursement includes reference to any value added tax or similar tax charged or chargeable in respect thereof References to Ireland shall not encompass Northern Ireland Reference to in writing and written shall, where the context permits, include matters written or produced in writing by electronic means For the avoidance of doubt, references to the: (a) (b) credit of a Counterparty Collateral Account Asset to the Counterparty Collateral Account, means the recording in the Counterparty Collateral Account of the segregation of such Counterparty Collateral Account Asset and crediting and credited, when used in that context, shall be construed accordingly; and debit of a Counterparty Collateral Account Asset to the Counterparty Collateral Account, means the recording in the Counterparty Collateral Account of the desegregation of such Counterparty Collateral Account Asset and debiting and debited, when used in that context, shall be construed accordingly.

114 1.14. Terms used in this Agreement with respect to a Relevant Existing Agreement or a Relevant Existing Transaction which are not defined herein shall have the meanings given to them in that Relevant Existing Agreement or the Relevant Existing Agreement pursuant to which that Relevant Existing Transaction was transacted, as applicable. 2. Relevant Eurosystem Obligations 2.1. The Relevant Eurosystem Obligations (a) (b) will be secured by security interests over the Collateral Pool in the form of the Deeds of Charge or in such other form as may be required by the Bank from time to time; and notwithstanding anything to the contrary in any other agreement between the Bank and the Counterparty (in the absence of an express disapplication of this clause 2.1(b)), will not be secured by any Other Deed of Charge Upon the initial entry into of a Relevant Eurosystem Operation and subject to the terms of the MPIPs Document regarding the procedures for initiating and confirming Relevant Eurosystem Operations, the Bank shall: (a) (b) other than in the case of a Relevant Eurosystem Operation referred to at paragraph (b) of the definition of Eurosystem Operation, issue to the Counterparty as soon as practicable thereafter a confirmation thereof (in respect thereof, the Confirmation ) in form and substance determined by the Bank from time to time, which determination may, in respect of any Relevant Eurosystem Operation and notwithstanding any other provision of this Agreement, be made pursuant to the MPIPs Document. Subject to any provision of the MPIPs Document to the contrary, a Confirmation shall constitute conclusive evidence, in the absence of manifest error, of the terms of the Relevant Eurosystem Operation the subject thereof as agreed between the Counterparty and the Bank. For the avoidance of doubt, failure by the Bank to deliver a Confirmation in accordance with this Agreement or the MPIPs Document shall not affect the validity of the Relevant Eurosystem Operation; and make the Liquidity Provided Amount in respect of the Relevant Eurosystem Operation available to the Counterparty in accordance with the terms of that Relevant Eurosystem Operation (a) Subject to clauses 2.3(b) and (c), 2.7 and 2.8, on the Maturity Date of a Relevant Eurosystem Operation the Counterparty shall be obliged to pay to the Bank the Liquidity Provided Amount corresponding to the Relevant Eurosystem Operation together with a sum in respect of interest, calculated in respect of each day of the 112

115 term of the Relevant Eurosystem Operation, including the date on which the Liquidity Provided Amount was made available to the Counterparty but excluding the Maturity Date, by reference to the following formula: Where: B i B = the Liquidity Provided Amount corresponding to the Relevant Eurosystem Operation; and i = the interest rate applicable to the Relevant Eurosystem Operation for that day (if any), expressed as a decimal (b) On the Optional Early Maturity Date of a Partially Accelerated OEM Operation the Counterparty shall be obliged to pay to the Bank the Accelerated LPA together with the amount referred to at clause 2.3(a), calculated in respect of the period in days from and including the date on which the Liquidity Provided Amount was made available to the Counterparty to but excluding the Optional Early Maturity Date as if: B = the Accelerated LPA. (c) On the Substitution Early Maturity Date of a Substitution Partially Accelerated Relevant Eurosystem Operation the Counterparty shall, subject to clause 2.8, be obliged to pay to the Bank the Substitution Accelerated LPA together with the amount referred to at clause 2.3(a), calculated in respect of the period in days from and including the date on which the Liquidity Provided Amount was made available to the Counterparty to but excluding the Substitution Early Maturity Date as if: B = the Substitution Accelerated LPA (a) If the Counterparty fails to make any payment required to be made by it in connection with a Relevant Eurosystem Operation when due it shall pay interest on the amount due from the due date for payment up to the time of actual payment (as well after as before any demand judgement) at the Relevant Rate. (b) Interest under this clause 2.4 shall accrue daily on the basis of a year of 360 days from and including the Maturity Date to the earlier of: the date of payment; and the last day of each period of one year, and (where no payment has been made during that period of a year) shall be due and payable at the end of each such period. So long as the default continues, the rate referred to in clause 2.4(a) shall be calculated on a similar basis at the end of each such period of a year, and interest payable under this clause 2.4 which is

116 unpaid at the end of each such period of a year shall thereafter itself bear interest at the rate provided in this clause Payments will be subject in all cases to any laws and regulations applicable thereto All amounts payable (whether in respect of principal, interest or otherwise) in respect of a Relevant Eurosystem Operation shall be made by the Counterparty free and clear of any withholding at source or deduction at source for or on account of any present or future taxes, fees, duties, assessments or governmental charges of whatever nature unless the Counterparty is required by the laws or other legal provisions of the European Union or Ireland to make such a payment subject to such deduction or withholding. In the event of any such deduction or withholding the sum payable by the Counterparty in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that after the making of such deduction or withholding the Bank receives and retains (free from any liability in respect of such deduction or withholding) a net sum equal to the amount which it would have received and so retained if no such deduction or withholding had been made As soon as practicable after payment by the Counterparty of the amount required to be paid by it in respect of a Partially Accelerated OEM Operation pursuant to clause 2.3 on the Optional Early Maturity Date, the Bank shall (unless the terms of the relevant OEM Operation expressly disapply this requirements of this clause 2.7) issue to the Counterparty a revised confirmation of the Partially Accelerated OEM Operation which shall be deemed, as of its issue, to comprise the Confirmation in respect thereof and, in respect of the terms of the Partially Accelerated OEM Operation, to be conclusive in the absence of manifest error. For the avoidance of doubt, failure by the Bank to deliver a Confirmation shall not affect the validity of the Partially Accelerated OEM Operation In respect of any Relevant Eurosystem Operation referred to at paragraph (a) of the definition of Eurosystem Operation, the parties may from time to time agree (on terms to be agreed) that a specified Valuation Date will be designated as an early maturity date (a Substitution Early Maturity Date ) in respect of all or part of the Liquidity Provided Amount in respect of that Relevant Eurosystem Operation, on the basis that the liquidity represented thereby would continue to be provided, in accordance with the terms of the related Eurosystem Operation, by the Bank to the Counterparty pursuant to a Mortgage-Backed Promissory Note. In the case of a Substitution Partially Accelerated Relevant Eurosystem Operation, as soon as practicable after payment by the Counterparty of the amount required to be paid by it pursuant to clause 2.3 on the Substitution Early Maturity Date (or the discharge of such payment obligation by such other means, including set-off, as the parties may agree) the Bank shall issue to the Counterparty a revised confirmation of the Substitution Partially Accelerated Relevant Eurosystem Operation which shall be deemed, as of its issue, to comprise the Confirmation in respect thereof and, in respect 114

117 of the terms of the Substitution Partially Accelerated Relevant Eurosystem Operation, to be conclusive in the absence of manifest error. For the avoidance of doubt, failure by the Bank to deliver a Confirmation shall not affect the validity of the Substitution Partially Accelerated Relevant Eurosystem Operation If on any date amounts would otherwise be payable under any Finance Document (or, where such date is the Effective Date, under any Relevant Existing Agreement) in the same currency by each party to the other, then, on such date, each party s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would but for the foregoing provisions of this clause 2.9 have been payable by one party exceeds the aggregate amount that would but for the foregoing provisions of this clause 2.9 have been payable by the other party, replaced by an obligation on the party by which the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The amounts the subject of this clause 2.9 shall, until the Bank notifies the Counterparty to the contrary, exclude any fees and costs payable by the Counterparty pursuant to clause 8.4 (which notification may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof). 3. Administration of certain Collateral Pool Assets The Counterparty hereby covenants with the Bank that it shall, at all times during the term of this Agreement and unless otherwise agreed pursuant to the Deeds of Charge or directed by the Bank pursuant to the Finance Documents, administer Collateral Pool Credit Claims and all related matters in the same manner as it administers all other assets and related matters of the same type and in respect of which it is the sole beneficial owner and which are not subject to the Security or any other Encumbrance (and, for the avoidance of doubt, in the case of a Collateral Pool Credit Claim advanced pursuant to a Syndicated Facility, taking into account the administration arrangements provided for in the Collateral Pool Credit Claim Documentation). 4. Information 4.1. The Counterparty shall furnish to the Bank, on such dates as may be notified by the Bank to the Counterparty (which notification may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof) and on any other date at the request of the Bank, a Collateral Pool Schedule. If any addition to, or release from, the Collateral Pool made pursuant to clauses 5.2, 5.3 or 6.1 or otherwise involves an Other Collateral Pool Asset in respect of which information is required to be included on a Collateral Pool Schedule furnished to the Bank, an amended Collateral Pool Schedule reflecting such addition or release, as applicable, shall be furnished upon its being effected. If so requested by the Bank the Counterparty shall furnish, in lieu of or in addition to (as specified by the Bank) any such Collateral Pool Schedule on any such date, a schedule showing only the variations thereto that have been made or arisen since the previous such Collateral Pool Schedule or schedule was delivered. The Bank may from time to time impose additional requirements, or disapply all or any part of

118 the otherwise applicable requirements, regarding the form of, and/or the timing or means of furnishing, any Collateral Pool Schedule, or part of any Collateral Pool Schedule, relating to any: (a) (b) CCBM Collateral Assets as are, in the Bank s absolute discretion, required to ensure compliance with the CCBM Requirements; and/or Tri-Party Scheduled Collateral Assets as are, in the Bank s absolute discretion, required to ensure compliance with the Tri-Party Requirements The Counterparty shall permit the Bank or any Delegate of the Bank (including, for the avoidance of doubt and in connection with any CCBM Collateral Asset, the relevant correspondent central bank) at any time upon reasonable notice: (a) (b) to have access to all books of record, accounts and other relevant records relating to the administration of the Collateral Pool Credit Claims and related matters in accordance with the provisions of this Agreement, and to inspect the Counterparty s records and computer system and the manner in which Collateral Pool Credit Claims are segregated and the Collateral Pool Credit Claim Collateral Deeds in respect thereof are held The Counterparty shall, at the request of the Bank at any time upon reasonable notice: (a) (b) permit the Bank or any person on its behalf to carry out, or procure the carrying out by a third party or third parties; or procure the carrying out by a third party or third parties acceptable to the Bank (in order to provide to the Bank a report in a form and in substance acceptable to the Bank), of such audit or other evaluation of: (i) the Counterparty s compliance with its obligations (including of the Counterparty s records and computer system and the manner in which Other Collateral Pool Assets are segregated and the Collateral Pool Credit Claim Collateral Deeds in respect thereof are held); and/or (ii) the accuracy of any information provided by the Counterparty, under any Finance Document as the Bank may require. 5. Valuation of Collateral Pool 5.1. The: (a) Liquidity Value of the Collateral Pool or any part thereof on any Valuation Date shall mean an amount corresponding to the Nominal Value of the Collateral Pool or that part thereof, as applicable, adjusted in accordance with 116

119 the applicable risk control procedures of the Bank (which procedures shall, for the avoidance of doubt, include any haircuts and applicable currency conversion methodology), at close of business on the Business Day immediately preceding such Valuation Date; and (b) Nominal Value of the Collateral Pool, any Collateral Pool Asset or Eligible Collateral Asset on any Valuation Date shall mean the value of the Collateral Pool, that Collateral Pool Asset or that Eligible Collateral Asset, as applicable, in each case as determined in accordance with the applicable provisions of the MPIPs Document, and before adjustment in accordance with any applicable risk control procedures of the Bank including those referred to in clause 5.1(a), at close of business on the Business Day immediately preceding such Valuation Date If the Liquidity Value of the Collateral Pool shall on any Valuation Date be less than the Aggregate Liquidity Provided Amount, the Counterparty shall forthwith segregate such further Eligible Collateral Assets as will ensure that the Liquidity Value of the Collateral Pool is not less than the Aggregate Liquidity Provided Amount and those Eligible Collateral Assets shall form part of the Collateral Pool If the Liquidity Value of the Collateral Pool shall on any Valuation Date, after giving effect to any payment or transfer effected as of that Valuation Date pursuant to clause 5.4, exceed the Aggregate Liquidity Provided Amount, Collateral Pool Assets may be selected by the Counterparty having a value equal to or less than such excess amount and those Collateral Pool Assets shall cease to be part of the Collateral Pool and shall be desegregated, in the case of any: (a) (b) (c) (d) Counterparty Collateral Account Asset, as soon as practicable after receipt by the Bank of notification from the Counterparty of the Collateral Pool Asset so selected and, in the case of any thereof not comprising Fixed-Term Deposits, appropriate transfer instructions; Other Collateral Pool Asset, other than any Tri-Party Collateral Asset that is not a Tri-Party Scheduled Collateral Asset, no earlier than upon receipt by the Bank of the relevant Collateral Pool Schedule evidencing such cessation or, where applicable, other evidence of such cessation provided for by the applicable CCBM Requirements; Tri-Party Collateral Asset that is not a Tri-Party Scheduled Collateral Asset, no earlier than any time provided for such cessation and/or desegregation in the applicable Tri-Party Arrangements; and a Collateral Pool Asset of a type that, at the date of this Agreement, is not an Eligible Collateral Asset will have such meaning as may be notified by the Bank to the Counterparty on or after its becoming an Eligible Collateral Asset, subject always to compliance, in the case of any:

120 (i) (ii) CCBM Collateral Asset, with all CCBM Requirements notified to the Counterparty by the Bank or the relevant CCB as applicable to the desegregation of CCBM Collateral Assets of that type; and Tri-Party Collateral Asset, with all Tri-Party Requirements notified to the Counterparty by the Bank or, in the case of a Tri-Party CCBM Collateral Asset, the relevant CCB as applicable to the desegregation of Tri-Party Collateral Assets of that type. Any notification from the Bank to the Counterparty referred to in this clause 5.3 may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof If Distributions are received or receivable by the Bank with respect to any Counterparty Collateral Account Marketable Assets the Bank may, at its discretion and without receipt of any notification from the Counterparty pursuant to clause 5.3 selecting such Distributions for desegregation, pay or transfer (or procure the payment or transfer) of such Distributions or, as applicable, assets equivalent to such Distributions, to the Counterparty. If interest is payable on any part of the Counterparty Collateral Account Cash Balance representing a Fixed-Term Deposit, the Bank may, at its discretion and without receipt of any notification from the Counterparty selecting the cash representing such interest payment for desegregation pursuant to clause 5.3, pay such interest to the Counterparty. The Bank shall not exercise its discretion under this clause 5.4 if the Liquidity Value of the Collateral Pool, as reduced by the Liquidity Value of the relevant Distributions or assets equivalent thereto, as applicable, would be less than the Aggregate Liquidity Provided Amount During the subsistence of any of the Security, otherwise than with the prior written consent of the Bank, the Counterparty shall: (a) (b) not create or attempt to create or permit to arise or subsist any Encumbrance on or over the Collateral Pool Assets or any of them, other than an Encumbrance in favour of the Bank; or not (in the case of Collateral Pool Credit Claims, only, otherwise than in such circumstances as are expressly permitted by the applicable Deed of Charge) sell, transfer, lend or otherwise dispose of or deal in the Collateral Pool Assets or any of them or redeem, agree to redeem or accept repayment in whole or in part of any Collateral Pool Asset or attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one time or over a period of time Notwithstanding any other provision of this Agreement or any other Finance Document to the contrary, an asset that, at any time: (a) is: 118

121 (b) (i) (ii) (iii) (iv) credited to the Counterparty Collateral Account; included in the Collateral Pool Schedule most recently provided to the Bank; identified, in accordance with applicable CCBM Requirements, to the Bank as having been segregated in accordance with the terms of this Agreement so as to form part of the Collateral Pool; or designated, in accordance with applicable Tri-Party Arrangements, as having been mobilised by the Counterparty for Eurosystem Operations and is of a type that, if it was a Collateral Pool Asset, would not be a Tri- Party Scheduled Collateral Asset or a Tri-Party Counterparty Collateral Account Asset; and fails to comply with the Eligibility Criteria applicable to the category of assets to which it belongs and/or is not segregated, (a Non-Compliant Collateral Pool Asset ) shall be treated as a Collateral Pool Asset for all purposes save that its Nominal Value and Liquidity Value shall be deemed to be zero. For the avoidance of doubt, the allocation by the Bank of a Nominal Value or Liquidity Value greater than zero to a Collateral Pool Asset shall not constitute any representation, warranty or agreement of the Bank as to the satisfaction by that Collateral Pool Asset of the Eligibility Criteria applicable to the category of assets to which it belongs and/or, in the case of an Other Collateral Pool Asset, its segregation. 6. Warranties, Representations and Undertakings 6.1. The Counterparty represents, warrants and undertakes to the Bank that, on the date hereof and on each subsequent Valuation Date and (if other than a Valuation Date) any date on which any Eligible Collateral Asset is segregated so as to form part of the Collateral Pool (other than a segregation that occurs other than as a result of any act undertaken by or on behalf of the Counterparty), all Collateral Pool Assets forming part of the Collateral Pool comply or as the case may be shall comply with the Eligibility Criteria applicable to the category of assets to which it belongs. If at any time the Counterparty becomes aware that any Collateral Pool Asset is a Non-Compliant Collateral Pool Asset: (a) (b) the Counterparty shall immediately notify the Bank of that fact and segregate additional Eligible Collateral Asset(s) so that the Liquidity Value of the Collateral Pool is not less than the Aggregate Liquidity Provided Amount; and after: (i) (ii) effect is given to the segregation referred to in paragraph (a) of this clause 6.1; and provision, where applicable, of an amended Collateral Pool Schedule in accordance with clause 4.1, the Counterparty shall remove, and the Bank shall facilitate the removal, of such Non-Compliant Collateral Pool Asset from the Collateral Pool provided always

122 that, immediately following that removal, the Liquidity Value of the Collateral Pool is not less than the Aggregate Liquidity Provided Amount The Counterparty hereby undertakes with the Bank that it shall: (a) (b) at all times maintain records in a computer readable form or otherwise of all information in relation to each Collateral Pool Credit Claim necessary to administer and/or enforce each such Collateral Pool Credit Claim (but taking into account, in the case of a Collateral Pool Credit Claim advanced pursuant to a Syndicated Facility, the administration arrangements provided for in the Collateral Pool Credit Claim Documentation); and ensure the segregation on any day of each asset included on the Collateral Pool Schedule most recently provided to the Bank or otherwise identified, in accordance with applicable CCBM Requirements, to the Bank as having been segregated in accordance with the terms of this Agreement so as to form part of the Collateral Pool The Counterparty further warrants and represents to the Bank that on the date hereof: (a) (b) (c) (d) (e) it is a body corporate duly incorporated under the laws of the Counterparty Jurisdiction with power to enter into each of the Finance Documents and to exercise its rights and perform its obligations hereunder and thereunder; it has duly taken all corporate and other action and received the consent of any third party that in either case is required: (i) to authorise its execution of each such Finance Document and the performance of its obligations thereunder; and (ii) to ensure the validity and enforceability in accordance with the respective terms of each such Finance Document (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances and the time barring of claims); in any proceedings taken in relation to any of the Finance Documents, it will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process; the obligations expressed to be assumed by it in each of the Finance Documents are legal and valid obligations binding on it in accordance with the terms hereof and thereof (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances and the time barring of claims); and it has not taken any corporate action nor have any other steps been taken nor legal proceedings been started or threatened against it for its winding-up, 120

123 dissolution or re-organisation or for the appointment of a receiver, an examiner, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues The Counterparty undertakes to the Bank that if at any time any arrangement the subject of any Finance Document (including, without limitation, the provision of any Liquidity Provided Amount or security therefor) is not in full compliance with the then applicable risk control procedures of the Bank (as the same may have been amended to ensure compliance with applicable Eurosystem requirements) the Counterparty shall, on the request of the Bank and at its own cost, enter into such documentation and do such acts and things as the Bank shall reasonably require in order to ensure such arrangement complies in all respects with such risk control procedures The Counterparty undertakes to the Bank from time to time upon written demand to execute, at its own cost, any document or do any act or thing as the Bank may reasonably require: (a) (b) to give full effect to the arrangements contemplated by the Finance Documents; and/or to facilitate the exercise, or the proposed exercise, of any of the Bank s rights under the Finance Documents. 7. Collateral Pool Credit Claim Collateral Deeds 7.1. The Counterparty agrees that: (a) (b) the Collateral Pool Credit Claim Collateral Deeds shall be identifiable and distinguishable from the deeds and documents in relation to other assets which are held by or on behalf of or administered by the Counterparty and, in respect of any Collateral Pool Credit Claim, the related Collateral Pool Credit Claim Collateral Deeds shall be kept, held and/or dealt with in the same manner as the Counterparty keeps, holds and deals with the deeds and documents relating to assets of the same type as that Collateral Pool Credit Claim which are not at the relevant time comprised in the Collateral Pool. However for the avoidance of doubt it is hereby confirmed that there is no requirement for such Collateral Pool Credit Claim Collateral Deeds to be physically segregated; and the: (i) (ii) Collateral Pool Credit Claim Collateral Deeds; and all other books of record, accounts and other relevant records relating to the administration of Collateral Pool Credit Claims and related matters, shall be maintained in Ireland or, solely in the case of any thereof comprising CCBM Collateral Deeds or relating solely to the administration of CCBM Collateral Assets, in the jurisdiction of the relevant correspondent central bank.

124 7.2. On or after the Enforcement Date of any Deed of Charge the Counterparty shall deliver the Collateral Pool Credit Claim Collateral Deeds relating to any Other Collateral Pool Assets the subject of the relevant Security (or, in the case of any Collateral Pool Credit Claim Documentation relating to a Collateral Pool Credit Claim advanced under a Syndicated Facility, procure that such control, access and possession of such Collateral Pool Credit Claim Documentation as is available to the Counterparty in accordance with the terms thereof is instead made available) to, or to the order of, the Bank on the written request of the Bank The provisions of clause 7.1 and clause 7.2 are, in respect of any CCBM Collateral Assets and any CCBM Collateral Deeds relating thereto, subject always to: (a) (b) any provision of such CCBM Collateral Deeds; and any applicable CCBM Requirements of which the Counterparty is aware, to the contrary. 8. Counterparty Collateral Account 8.1. The Bank agrees with the Counterparty to establish and maintain the Counterparty Collateral Account as an account in the books and records of the Bank for marketable assets and cash denominated in euro (including such cash representing Fixed-Term Deposits), which agreement is entered into: (a) (b) (c) solely to facilitate the collateralisation by the Counterparty of the Relevant Eurosystem Obligations; on the terms and conditions of this Agreement; and subject to such other terms and conditions as may be notified by the Bank to the Counterparty from time to time The Counterparty Collateral Account Cash Balance is a debt due from the Bank to the Counterparty payable, subject to the other provisions of the Finance Documents, in euro, subject to compliance with applicable law and regulation The parties agree that: (a) the Bank shall in no circumstances have any obligation to accept any assets for credit to the Counterparty Collateral Account other than cash denominated in euro and eligible market assets and if: 122 (i) any non-cash distribution arises in respect of any eligible market asset and such distribution is in a form which does not comprise a eligible market asset, the Bank shall have no obligation to receive or hold such non-cash distribution and, if it does receive and hold such non-cash distribution, such non-cash distribution shall not, for the avoidance of doubt, be

125 (b) treated as a Collateral Pool Asset and no Nominal Value or Liquidity Value shall be attributed to it; and (ii) any cash payment denominated other than in euro is transferred to the Bank for credit to the Counterparty Collateral Account, the Bank shall have no obligation to accept receipt of such payment or credit it to the Counterparty Collateral Account but, if the Bank does accept receipt of it for credit to the Counterparty Collateral Account, the amount credited to the Counterparty Collateral Account shall be the euro equivalent of that payment and the Bank s obligations to the Counterparty in respect of that payment shall instead be in respect of the euro amount so credited; the Bank will identify the Counterparty Collateral Account Marketable Assets in its books and records as being beneficially owned by the Counterparty, subject to the Security, but it is expressly agreed and acknowledged by the Counterparty that: (i) the Bank may hold Counterparty Collateral Account Marketable Assets at or through one or more Depositories or custodians (including, where applicable, CCBs and Tri-Party Service Providers) which, in turn, may use sub-depositories and sub-custodians and Counterparty Collateral Account Marketable Assets held at or through Depositories and custodians shall be held in accordance with, and subject to, the agreements, rules, regulations and conditions imposed by such Depositories and custodians; (ii) subject, in the case of any Tri-Party Counterparty Collateral Account Asset, to any provision of any applicable Tri-Party Arrangement to the contrary, all or any of the Counterparty Collateral Account Marketable Assets held as provided for in clause 8.3(b)(i) may be co-mingled, and treated as fungible, with other equivalent marketable assets of the Bank and/or other counterparties of the Bank held at or through any Depository or custodian and: A. the Bank will not be obliged to ensure that such Counterparty Collateral Account Marketable Assets will be separately distinguishable from such other fungible marketable assets belonging to the Bank or other counterparties of the Bank; and B. the Counterparty s rights in respect of any Counterparty Collateral Account Marketable Assets transferred to the Bank for credit to the Counterparty Collateral Account are not in respect of the actual Counterparty Collateral Account Marketable Assets so transferred but rather in respect of marketable assets equivalent to those Counterparty Collateral Account Marketable Assets The establishment and maintenance of the Counterparty Collateral Account, and all transactions effected through the Counterparty Collateral Account, are subject to such fees and costs (which, for the avoidance of doubt, may be determined so as to compensate the Bank for, but may not be limited to, any fees and costs charged to the Bank by any Depository or custodian referred to in clause 8.3(b)(i)) as may be determined by the Bank from time to time. Invoices in respect of or, as applicable,

126 confirmations of, fees due shall be issued by the Bank to the Counterparty on such basis as may be determined by the Bank from time to time Interest shall be payable on any part of the Counterparty Collateral Account Cash Balance representing a Fixed-Term Deposit solely in accordance with the terms applicable to that Fixed-Term Deposit save that such interest shall, subject to clause 5.4, be credited to the Counterparty Collateral Account The Counterparty irrevocably authorises the Bank, for so long as this Agreement remains in effect: (a) (b) (c) (d) subject to clause 8.6(b), to credit the Counterparty Collateral Account with cash and assets in accordance with payment or delivery instructions received from any person; to credit the Counterparty Collateral Account with the cash representing any Fixed-Term Deposit and any interest payable thereon; to honour any instructions from the Counterparty to withdraw or transfer any or all cash or assets credited to the Counterparty Collateral Account; and to rely solely on the identifying number of any account, intermediary or beneficiary s bank provided to the Bank, even if the name of the account, intermediary or beneficiary s bank to which that identifying number relates differs from the name thereof provided to the Bank, in each case provided that the instructions are delivered and authenticated in accordance with such protocol as may be determined by the Bank and notified to the Counterparty from time to time, and: (a) (b) to release information concerning the Counterparty Collateral Account and the Counterparty Collateral Account Balance to such person(s) as the Counterparty may notify to the Bank or as required by applicable law or regulation; and to identify the Counterparty Collateral Account and the Counterparty Collateral Account Balance in its books and records as subject to the Security The Bank shall have the right to refuse to credit any payment or delivery to the Counterparty Collateral Account if the receipt of such payment or delivery would contravene applicable laws, regulations or the Bank s policies at the relevant time The Bank shall not be obliged to act on any instructions to debit cash or other assets to the Counterparty Collateral Account save to the extent that such instruction is given in accordance with clause

127 8.9. The Bank shall not be obliged to act on any instructions in relation to the Counterparty Collateral Account or the Counterparty Collateral Account Balance or any part thereof if: (a) (b) to do so would be contrary to the Bank s policy at the relevant time or to the request, requirement or policy of any regulatory, governmental, fiscal, monetary or other body or authority to which the Bank is subject or submits, whether or not such request, requirement or policy has the force of law; or such instructions, in the Bank s opinion, are incomplete, incorrect, vague or ambiguous In the absence of an express agreement to the contrary, cash paid and assets transferred to the Bank for credit to the Counterparty Collateral Account shall not be credited to the Counterparty Collateral Account until such cash or assets as applicable are received by, and available to, the Bank The Bank will not be liable to the Counterparty or any other person for, and will be excused from, any failure or delay in performing its obligations as Bank under this Agreement if: (a) (b) such failure or delay is caused by circumstances beyond the Bank s reasonable control, including, but not limited to, legal constraint, emergency conditions, action or inaction of governmental, civil or military authority, fire, labour dispute, war, riot, theft, natural disaster, act of God, breakdown of any supplier, failure or interruption of service on telecommunications line, equipment failure, or any act, omission, negligence or fault of the Counterparty or any person over which the Bank does not have control; or the Bank believed that such performance would have violated any law, guideline, decree, rule or regulation of any regulatory, governmental, fiscal, monetary or other body or authority to which the Bank is subject or submits, whether or not such request, requirement or policy has the force of law. No such failure or delay will constitute a breach of any obligation of the Bank to the Counterparty under this Agreement or otherwise The Bank shall not be liable for any loss, damage, cost or expense caused by delays, errors or omissions in the transmission or carrying out of instructions or for any action or failure to act under or in connection with its establishment or maintenance of the Counterparty Collateral Account, unless such loss, damage, cost or expense has been caused by the fraud or wilful misconduct of the Bank and in no event will the Bank be liable for any loss, damage, cost or expense of any nature, arising from or in relation to economic loss, loss of business, profits, revenue, goodwill and anticipated savings, special damages, loss of or corruption to data, loss of operation time, loss of contracts or any indirect, consequential, exemplary or punitive loss The Counterparty agrees to indemnify the Bank and its Delegates against, and hold them harmless from, any liabilities, losses, claims, costs, damages, penalties, fines,

128 obligations, taxes, or expenses of any kind whatsoever including reasonable attorneys, accountants, consultants or experts fees and disbursements (together, Liabilities and each a Liability ) that may be imposed on, incurred by or asserted against any of them in connection with or arising out of the Bank s establishment and maintenance of the Counterparty Collateral Account provided, in the case of each Liability, that the Bank or Delegate, as applicable, has not engaged in fraud or wilful misconduct in connection therewith. Nevertheless, the Counterparty will not be obligated to indemnify any of the Bank and its Delegates under the preceding sentence with respect to any Liability for which the Bank is liable under clause 8.12 of this Agreement. This indemnity shall be a continuing obligation of the Counterparty notwithstanding the termination of this Agreement Notwithstanding that the Counterparty may require the maintenance of the Counterparty Collateral Account in order to satisfy its obligations under this Agreement, the maintenance of the Counterparty Collateral Account is at the sole discretion of the Bank The Bank shall have no duties or responsibilities in respect of the establishment and maintenance of the Counterparty Collateral Account whatsoever except such duties and responsibilities as are specifically set forth in this clause 8, and no covenant or obligation shall be implied against the Bank in connection with such establishment and maintenance or, insofar as it relates thereto, this Agreement Any notification from the Bank to the Counterparty referred to in this clause 8 may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof. 9. Events of Default 9.1. For the purposes of this Agreement an Event of Default shall be treated as occurring at the time specified in clause 9.2 if: (a) (b) any representation or warranty made or deemed to be made or repeated by the Counterparty under any Finance Document or under any applicable law was or is incorrect in any material respect when made or deemed to be made or repeated; or the Counterparty defaults in the due and punctual performance of any of the other provisions of the Finance Documents including payment of any Liquidity Provided Amount corresponding to any Relevant Eurosystem Operation, together with interest thereon, on the due date for payment thereof and (if, in the Bank s determination, capable of remedy) fails to remedy such default within such period as the Bank may designate (not to exceed 30 days) after notice is given by the Bank requiring such default to be remedied and designating the time period for remedy thereof; or 126

129 (c) (d) (e) the Counterparty ceases or threatens to cease to carry on its business or any substantial part thereof; or a decision is made by a competent judicial or other authority to implement in relation to the Counterparty or any of its Subsidiaries a procedure for the winding-up of, or the appointment of a liquidator or analogous officer over, the Counterparty or any such Subsidiary, as the case may be, or any other analogous procedure; or a decision is made by a competent judicial or other authority to implement a reorganisation measure or other analogous procedure intended to safeguard or restore the financial situation of, and to avoid the making of a decision of the kind referred to in paragraph (d) of this clause 9.1 in relation to, the Counterparty or any of its Subsidiaries; or (f) a petition is presented for the appointment of an examiner pursuant to section 2 of the Companies (Amendment) Act 1990 in relation to the Counterparty or any of its Subsidiaries or an examiner is appointed to the Counterparty or any of its Subsidiaries; or (g) (h) (i) (j) a petition (not being a petition falling within paragraph (f) of this clause 9.1 or a procedural step falling within paragraph (j) of this clause 9.1) is filed or presented in respect of the Counterparty or any of its Subsidiaries (other than by the Bank in respect of any obligation under a Finance Document) in any court or before any agency alleging or for the bankruptcy, winding-up or other insolvency of the Counterparty or any of its Subsidiaries (or any analogous proceeding) or seeking any reorganisation, arrangement, composition, re-adjustment, liquidation, dissolution or similar relief (other than a solvent reconstruction, amalgamation or reorganisation to which the Bank has given its prior written consent) under any present or future statute, law or regulation, such petition not having been stayed or dismissed within 30 days of its filing; or there is appointed a receiver, trustee or analogous officer to the Counterparty or any of its Subsidiaries or over all or any material part of the property of the Counterparty or of any of its Subsidiaries, unless the Bank has given its prior written confirmation that the Bank will not serve notice of the occurrence of an Event of Default on the basis of such appointment; or a declaration is made by the Counterparty or any of its Subsidiaries in writing of its inability to pay all or any of its debts or to meet its obligations, or a voluntary general agreement or arrangement is entered into by the Counterparty or any of its Subsidiaries with its creditors, or the Counterparty or any of its Subsidiaries is, or is deemed to be, insolvent or is deemed to be unable to pay its debts; or procedural steps preliminary to any matter referred to in paragraphs (d), (e), (f) or (h) of this clause 9.1 are taken; or

130 (k) (l) (m) (n) (o) (p) (q) the Counterparty or any of its Subsidiaries has an authorisation to conduct activities under either Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions or Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments suspended or revoked; or the Counterparty or any of its Subsidiaries is suspended or expelled from membership of any payment system or arrangement through which payments under monetary policy transactions are made or is suspended or expelled from membership of any securities settlement system used for the settlement of Eurosystem monetary policy operations or any other securities exchange or association or other self-regulating organisation concerned with dealing in securities, or suspended or prohibited from dealing in securities by any government agency; or measures such as are referred to in Articles 30, 31, 33 and 34 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions are taken against the Counterparty or any of its Subsidiaries; or an event of default occurs in relation to the Counterparty or any of its Subsidiaries, including any branch of the Counterparty or any such Subsidiary, as the case may be, under any agreement, arrangement or transaction entered into by it including any branch of it with any other member of the Eurosystem for the purpose of effecting monetary policy operations where any other member has exercised its right to close out under any such agreement, arrangement or transaction; or any event analogous to any of the events at paragraphs (d) to (j), inclusive, of this clause 9.1 occurs in any jurisdiction in relation to the Counterparty or any of its Subsidiaries; or the Counterparty ceases to be entitled to operate, or ceases to operate, the Settlement Account or, where the Settlement Account is opened in the name of a Third Party, such Third Party ceases to be so entitled or to so operate or withdraws its consent to the designation thereof as the Settlement Account for the purposes of the MPIPs Document; or the Counterparty fails to comply with the Eurosystem s rules concerning the use of securities the subject of the arrangements contemplated by the Finance Documents; or 128 (r) the Counterparty fails to provide to the Bank any information relevant to the Eurosystem s monetary policy operations, which failure causes severe consequences for the Bank; or

131 (s) (t) (u) (v) (w) (x) the Counterparty becomes subject to the freezing of funds and/or other measures imposed by the European Union under Article 75 of the Treaty on the Functioning of the European Union restricting the Counterparty s ability to use its funds; or the Counterparty becomes subject to the freezing of funds and/or other measures imposed by a Member State restricting the Counterparty s ability to use its funds; or all or a substantial part of the Counterparty s assets are subject to a freezing order, attachment, seizure or any other procedure that is intended to protect the public interest or the rights of the Counterparty s creditors; or all or a substantial part of the Counterparty s assets are assigned to another entity; or any other impending or existing event the occurrence of which may threaten the performance by the Counterparty of its obligations under any arrangement it entered into for the purpose of effecting monetary policy operations or any other rules applying to the relationship between the Counterparty and any of the Participating NCBs; or an event of default (not materially different from any event of default falling within paragraphs (a) to (w) of this clause 9.1) occurs in relation to the Counterparty or any of its Subsidiaries under any agreement concluded with any other member of the Eurosystem entered into for the purposes of the management of the foreign reserves or own funds of any such member of the Eurosystem, and, except in the case of an event which arises in relation to the Counterparty and falls within paragraphs (d) or (o) or (s) (in the case of (o), to the extent that it relates to paragraph (d)), of this clause 9.1, the Bank serves written notice on the Counterparty stating that such event shall be treated as an Event of Default for the purposes of this Agreement An Event of Default is to be treated as occurring: (a) (b) in the case of an event which arises in relation to the Counterparty and falls within paragraphs (d) or (o) or (s) (in the case of (o), to the extent that it relates to paragraph (d)) of clause 9.1, at the time when the relevant event occurs; in any other case, at the time designated by the Bank for such purpose in a notice: (i) (ii) (iii) served by the Bank in accordance with clause 11 on the Counterparty; served not more than three Business Days before the time so designated; and stating that the relevant event is to be treated as an Event of Default for the purposes of this Agreement.

132 9.3. The Bank may, if: (a) (b) the Counterparty fails to remedy an Event of Default within the period (if any) permitted by the Bank; or it otherwise determines that it is appropriate to do so on grounds of prudence, require the Counterparty to discharge the Relevant Eurosystem Obligations then outstanding, in each case by paying to the Bank an amount equal to the aggregate of the Liquidity Provided Amount in respect of all outstanding Relevant Eurosystem Operations and interest thereon, calculated in accordance with clause 2.3(a) but as if reference to the Maturity Date was to such repayment date. If the Counterparty shall fail to do so forthwith the Bank may declare the Security created by the Deeds of Charge or any of them to be enforceable. 10. No Partnership It is hereby acknowledged and agreed by the parties that nothing in this Agreement shall be construed as giving rise to any partnership between the parties. 11. Notices Any notices to be given pursuant to the Finance Documents to any of the parties shall be sufficiently served if in writing and delivered by hand or by facsimile transmission and sent: (a) (b) in the case of the Counterparty, to the address or facsimile number, as applicable, and for the attention of the department or person, if any, identified with its name below; in the case of the Bank, to, PO Box 11517, Spencer Dock, North Wall Quay, Dublin 1 (facsimile number: ; Attn: the Head of Payments and Securities Settlements); or to such other address or facsimile number, and/or for the attention of such other department or person, as may from time to time be notified by either party to the other by written notice in accordance with the provisions of this clause 11. The Bank may, in its absolute discretion, agree with the Counterparty that notices (or any notice or class of notices) may be delivered by any other means including ( Alternative Means ), in which case any such notice delivered by such Alternative Means shall be sent in accordance with the terms of that agreement Any such notice shall be deemed to be served: 130 (a) if sent by hand, when delivery at the address of the party to be served is made or attempted, if that is between 9 am and 5 pm on a Business Day or, if it is left before 9 a.m. on a Business Day, at 9 a.m. on that Business Day and in all other cases at 9 a.m. on the next Business Day;

133 (b) (c) if sent by facsimile transmission, when it is so sent if it is sent between 9 a.m. and 5 p.m. on a Business Day or, if it is sent before 9 a.m. on a Business Day, at 9 a.m. on that Business Day and in all other cases at 9 a.m. on the next Business Day; and if sent by an Alternative Means, at the time that, in accordance with the agreement between the parties in respect of that Alternative Means, it is deemed to be given if that time is between 9 a.m. and 5 p.m. on a Business Day and, if that time is before 9 a.m. on a Business Day, at 9 a.m. on that Business Day and in all other cases at 9 a.m. on the next Business Day Where the terms of any Finance Document provides, in respect of any notice to which this clause 11 would otherwise apply, for an alternative means of giving, and/or deemed time of delivery, such notice, such notice may be given, and if so given shall be deemed to be delivered, in accordance with those terms Any notification or notice from, or guidance issued by, the Bank referred to in clause 1.1 may, notwithstanding any other provision of this Agreement, be given or issued by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof Any notification or notice referred to in this Agreement as given by a CCB may, notwithstanding any other provision of this Agreement, be given in accordance with any applicable CCBM Security Document, CCBM Requirements of which the Counterparty is aware or Tri-Party Arrangements Without prejudice to the generality of the other provisions of this clause 11, the Bank shall not, for any purpose in connection with the Finance Documents, be treated as being, or otherwise be deemed to be, on notice (or otherwise advised) of any matter disclosed by the Counterparty to the Bank or any Delegate, and the Bank s rights and remedies under the Finance Documents shall be unaffected by, and fully preserved notwithstanding, any such disclosure, unless such disclosure is: (a) (b) effected in writing and notified to the Bank in accordance with the other provisions of this clause 11; and expressed to be effected for the relevant purpose, in which case the effect of such disclosure on the Bank s rights and remedies under any Finance Document shall be determined in accordance with the relevant provisions of that Finance Document. 12. Entire Agreement and Variation The Finance Documents set out the entire agreement and understanding between the parties in respect of the subject matter hereof No variation of this Agreement shall be effective unless it is in writing and signed by (or by some person duly authorised by) each of the parties save that the Bank may, by

134 notice to the Counterparty, effect any variation that, in the Bank s absolute discretion, is required to ensure compliance with applicable Eurosystem requirements (including CCBM Requirements), which notice may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof The Bank shall, upon receipt of a request to that effect from the Counterparty made in accordance with such procedures and at such intervals as may from time to time be agreed between the Bank and Counterparty, confirm (if such is the case) in writing to the Counterparty or such person(s) as the Counterparty may specify that: (a) (b) so far as the Bank is aware no event has occurred whereby any floating charge constituted by any Deed of Charge has converted; and the Bank has not taken any action pursuant to any Deed of Charge to convert any floating charge constituted by any Deed of Charge, into a fixed charge. 13. Waiver and Severability Exercise or failure to exercise any right under this Agreement shall not, unless otherwise provided herein, constitute a waiver of that or any other right If any of the provisions hereof should be or become invalid in whole or in part, the other provisions shall remain in force. The invalid provisions shall, according to the intent and purpose of the Agreement, be replaced by such valid provision which in its economic effect comes as close as legally possible to that of the invalid provision. The same shall apply with respect to involuntary gaps herein. 14. Assignment The Bank may transfer and assign any or all of its rights, interest and obligations in and under all or any of the Finance Documents, the Relevant Eurosystem Operations and the Relevant Eurosystem Obligations to any person, and upon such terms and conditions, as the Bank thinks fit. The Bank shall be entitled to provide any information concerning the Counterparty, the Finance Documents, the Relevant Eurosystem Operations and the Relevant Eurosystem Obligations to any Successor, assignee or proposed Successor or assignee or to any person who may otherwise enter into contractual relations with the Bank in relation to any Finance Document, the Relevant Eurosystem Operation and/or Relevant Eurosystem Obligation. The Counterparty may not transfer, assign or otherwise deal in any of its rights, interest and obligations in and under any of the Finance Documents, the Relevant Eurosystem Operations and the Relevant Eurosystem Obligations without the prior written consent of the Bank. 132

135 15. Termination This Agreement may at any time be terminated by either party by giving to the other not less than 30 days prior notice in writing (such termination becoming effective upon expiry of such notice), provided that such termination shall not take effect with respect to any Relevant Eurosystem Operation which is then outstanding or any related Relevant Eurosystem Obligation and the provisions of this Agreement shall continue to apply to each Relevant Eurosystem Operation and the related Relevant Eurosystem Obligations until such Relevant Eurosystem Operation and those Relevant Eurosystem Obligations are discharged in full by the Counterparty On the termination of this Agreement the Bank shall release the Security. 16. Legal Opinions On the date of this Agreement and, in respect of any Deed of Charge entered into after the date of this Agreement, on the date of that Deed of Charge, the Counterparty shall procure the delivery to the Bank of such one or more opinions from legal advisers acceptable to the Bank as the Bank notifies the Counterparty in advance of such date are required in respect thereof. The Counterparty and the Bank may agree that, in respect of any legal opinion required by the Bank: (a) (b) the Bank will procure the delivery to it of such opinion; and the Counterparty will pay or reimburse to the Bank all the Bank s reasonable costs and expenses incurred in procuring that delivery. 17. Costs and Expenses The Counterparty agrees, in respect of each Finance Document: (a) (b) to pay and bear its own costs and expenses incurred in connection therewith (including in connection with any audit or other evaluation or report referred to in clause 4.3); to pay or reimburse to the Bank all the Bank s reasonable costs and expenses (including legal expenses) incurred in connection with: (i) the preparation, negotiation, execution and delivery thereof; (ii) the exercise and enforcement of any of the Bank s rights thereunder; and (iii) any audit or other evaluation or report referred to in clause 4.3. Without limiting the generality of the foregoing and for the avoidance of doubt, the Counterparty agrees to pay all the Bank s costs and expenses (including legal expenses) in connection with the CCBM Security (which shall include all fees and costs payable to any relevant correspondent central bank in connection with the CCBM Security) as may be determined by the Bank from time to time.

136 18. Certifications and Determinations Any certification or determination by the Bank of a rate or amount under or in connection with any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates. 19. Effective Date, Transitional Provisions and Termination of Relevant Existing Agreements This Agreement shall come into effect on the Effective Date With effect from the Effective Date, in respect of any Relevant Existing Transaction that is: (a) a Repo, other than one the Repurchase Date of which is the Effective Date, the Repurchase Date shall be accelerated so as to occur immediately on the basis that: (i) (ii) (iii) (iv) no payment shall be made by the Counterparty to the Bank in respect of the Repurchase Price of the Relevant Existing Transaction on the Repurchase Date; the Bank s obligation to deliver to the Counterparty any Equivalent Securities to the Purchased Securities of, or any Margin Securities in respect of, the Relevant Existing Transaction shall be discharged by the Bank crediting such Equivalent Securities to the Counterparty Collateral Account on the Effective Date; the Relevant Existing Operation shall be deemed to comprise a Relevant Eurosystem Operation for the purposes of this Agreement (in respect thereof, the Repo Related Operation ) in respect of which, for the avoidance of doubt, the Liquidity Provided Amount shall be the Relevant Existing Liquidity Provided Amount; and if an Optional Early Termination Date has, at the Effective Date, been designated with respect to the Repo and: A. such Optional Early Termination Date is the Effective Date, nothing in this Agreement shall affect the operation of the provisions of the MRA and the Operating Procedures relating to the consequences of such designation and only the Continuing Transaction, if any, shall be treated as a Relevant Existing Transaction for the purposes of the other provisions of this clause 19.2(a); B. such Optional Early Termination Date is a date after the Effective Date, the Counterparty shall be deemed to have designated such date as an Optional Early Maturity Date in respect of an amount of the Liquidity Provided Amount of the Repo Related Operation equal to the Terminated Purchase Price, 134

137 and, upon the taking effect of the above provisions and the discharge of all payment and delivery obligations of the parties in respect of any designation of an Optional Early Termination Date referred to at clause 19.2(a)(iv)(A), the MRA shall terminate so that, with effect therefrom but subject to the below, each party unconditionally releases and discharges the other party fully and irrevocably from any and all obligations, claims, damages, demands and liabilities whatsoever or causes of action of any kind recognised by law or equity which such party may at the date of this Agreement or at any future time have in connection with, or arising under or on account, of the other party s obligations under or in connection with the MRA provided that, if the discharge by the Counterparty on or prior to the Effective Date of any obligation of it under the MRA is avoided or reduced, whether as a result of its insolvency or any other reason whatsoever, the liability of the Counterparty in respect thereof shall continue as if the above release and discharge had not occurred, and the MRA was in full force and effect, with respect to that liability; or (b) a Credit Claims Advance, other than one the Scheduled Maturity Date of which is the Effective Date, the Scheduled Maturity Date shall be accelerated so as to occur immediately on the basis that: (i) (ii) (iii) no payment shall be made by the Counterparty to the Bank in respect of the Liquidity Provided Amount or interest thereon; the Relevant Existing Operation shall be deemed to comprise a Relevant Eurosystem Operation for the purposes of this Agreement (in respect thereof, the CCA Related Operation ) in respect of which, for the avoidance of doubt, the Liquidity Provided Amount shall be the Relevant Existing Liquidity Provided Amount; if an Optional Early Maturity Date has, at the Effective Date, been designated with respect to the Credit Claims Advance and: A. such Optional Early Maturity Date is the Effective Date, nothing in this Agreement shall affect the operation of the provisions of the Credit Claims Letter relating to the consequences of such designation and the Credit Claims Advance shall only be treated as a Relevant Existing Transaction for the purposes of the other provisions of this clause 19.2(b) if the Relevant Eurosystem Operation is a Partially Accelerated Relevant Eurosystem Operation and after effect has been given to the modifications effected to the Credit Claims Advance as a result of the designation of the Optional Early Maturity Date; B. such Optional Early Maturity Date is a date after the Effective Date, the Counterparty shall be deemed to have designated such date as an Optional Early Maturity Date in respect of an amount of the Liquidity Provided Amount of the CCA Related Operation equal to the Accelerated LPA; and

138 (iv) the Counterparty shall procure that all Eligible Loans and Related Security the subject of the Charged Property immediately prior to the Effective Date are segregated (within the meaning of this Agreement) as Collateral Pool Credit Claims on the Effective Date, and, upon the taking effect of the above provisions and the discharge of all payment obligations of the Counterparty in respect of the designation of an Optional Early Maturity Date referred to at clause 19.2(b)(iii)(A), the Credit Claims Letter shall terminate, and the security created pursuant to any Deed of Charge shall be released, so that, with effect therefrom but subject to the below, each party unconditionally releases and discharges the other party fully and irrevocably from any and all obligations, claims, damages, demands and liabilities whatsoever or causes of action of any kind recognised by law or equity which such party may at the date of this Agreement or at any future time have in connection with, or arising under or on account, of the other party s obligations under or in connection with the Credit Claims Letter and any such Deed of Charge provided that, if the discharge by the Counterparty on or prior to the Effective Date of any obligation of it under any thereof is avoided or reduced, whether as a result of its insolvency or any other reason whatsoever, the liability of the Counterparty in respect thereof shall continue as if the above release and discharge had not occurred, and the Credit Claims Letter and any such Deed of Charge was in full force and effect, with respect to that liability; (c) a Deposit-Collateralised Advance, other than one the Scheduled Maturity Date of which is the Effective Date, the Maturity Date shall be accelerated so as to occur immediately on the basis that: (i) (ii) (iii) no payment shall be made by the Counterparty to the Bank in respect of the Relevant Advance or interest thereon; the Relevant Existing Operation shall be deemed to comprise a Relevant Eurosystem Operation for the purposes of this Agreement (in respect thereof, the DCA Related Operation ) in respect of which, for the avoidance of doubt, the Liquidity Provided Amount shall be the Relevant Existing Liquidity Provided Amount; if an Optional Early Maturity Date has, at the Effective Date, been designated with respect to the Deposit-Collateralised Advance and: A. such Optional Early Maturity Date is the Effective Date, nothing in this Agreement shall affect the operation of the provisions of the Deposit-Collateralised Advance Letter relating to the consequences of such designation and the Deposit-Collateralised Advance shall only be treated as a Relevant Existing Transaction for the purposes of the other provisions of this clause 19.2(c) if it is a Partially Accelerated Relevant OEM Advance and after effect has been given 136

139 (iv) to the modifications effected thereto as a result of the designation of the Optional Early Maturity Date; B. such Optional Early Maturity Date is a date after the Effective Date, the Counterparty shall be deemed to have designated such date as an Optional Early Maturity Date in respect of an amount of the Liquidity Provided Amount of the DCA Related Operation equal to the Accelerated Amount; and the Bank shall credit all Collateral Deposits in existence immediately prior to the Effective Date to the Counterparty Collateral Account on the Effective Date, and, upon the taking effect of the above provisions and the discharge of all payment obligations of the Counterparty in respect of the designation of an Optional Early Maturity Date referred to at clause 19.2(c)(iii)(A), the Deposit- Collateralised Advance Letter shall terminate so that, with effect therefrom but subject to the below, each party unconditionally releases and discharges the other party fully and irrevocably from any and all obligations, claims, damages, demands and liabilities whatsoever or causes of action of any kind recognised by law or equity which such party may at the date of this Agreement or at any future time have in connection with, or arising under or on account, of the other party s obligations under or in connection with the Deposit-Collateralised Advance Letter provided that, if the discharge by the Counterparty on or prior to the Effective Date of any obligation of it under the Deposit-Collateralised Advance Letter is avoided or reduced, whether as a result of its insolvency or any other reason whatsoever, the liability of the Counterparty in respect thereof shall continue as if the above release and discharge had not occurred, and the Deposit-Collateralised Advance Letter was in full force and effect, with respect to that liability; (d) the Bank shall credit all Eligible Securities the subject of the Secured Assets (each within the meaning of the TARGET2 Securities Charge) in existence immediately prior to the Effective Date to the Counterparty Collateral Account on the Effective Date and, upon such credit being effected, the security created pursuant to the TARGET2 Securities Charge shall be released so that, with effect therefrom but subject to the below, each party unconditionally releases and discharges the other party fully and irrevocably from any and all obligations, claims, damages, demands and liabilities whatsoever or causes of action of any kind recognised by law or equity which such party may at the date of this Agreement or at any future time have in connection with, or arising under or on account, of the other party s obligations under or in connection with the TARGET2 Securities Charge provided that, if the discharge by the Counterparty on or prior to the Effective Date of any Secured Obligation (within the meaning of the TARGET2 Securities Charge) is avoided or reduced, whether as a result of its insolvency or any other reason whatsoever, the liability of the Counterparty in respect thereof shall continue as if the above release and discharge had not occurred, and the TARGET2 Securities Charge was in full force and effect, with respect to that liability; and

140 (e) each Master Substitution Agreement shall terminate so that, with effect therefrom but subject to the below, each party unconditionally releases and discharges the other party fully and irrevocably from any and all obligations, claims, damages, demands and liabilities whatsoever or causes of action of any kind recognised by law or equity which such party may at the date of this Agreement or at any future time have in connection with, or arising under or on account, of the other party s obligations under or in connection with such Master Substitution Agreement provided that, if the discharge by the Counterparty on or prior to the Effective Date of any obligation of it under any the Master Substitution Agreement is avoided or reduced, whether as a result of its insolvency or any other reason whatsoever, the liability of the Counterparty in respect thereof shall continue as if the above release and discharge had not occurred, and the Master Substitution Agreement was in full force and effect, with respect to that liability The Bank shall not issue to the Counterparty any Confirmation of any Related Operation and, instead, the documentation relating to the related Relevant Existing Operation, together with this Agreement, shall, subject to any provision of the MPIPs Document to the contrary, constitute conclusive evidence, in the absence of manifest error, of the terms of that Related Operation. For the avoidance of doubt, absence of a Confirmation of a Related Operation shall not affect the validity of that Related Operation. 20. Governing Law and Jurisdiction This Agreement (including any non-contractual obligations arising out of or in connection with it) and the Relevant Eurosystem Obligations shall be governed by and construed in accordance with the laws of Ireland The Courts of Ireland shall have exclusive jurisdiction (without prejudice to the competence of the Court of Justice of the European Union) to settle any dispute (including claims for set-off and counterclaim) which may arise in connection with the creation, validity, effect, interpretation or performance of this Agreement or any other Finance Document (other than a CCBM Security Document and subject to any provision to the contrary of any other Finance Document where the terms of that Finance Document expressly disapply, in respect of that provision, the provisions of this clause 20.2) or the legal relationships established herein or therein or otherwise arising in that connection (including any non-contractual obligations arising out of or in connection with it or them), and for such purposes the parties hereto irrevocably submit to the jurisdiction of the courts of Ireland. 138

141 Appendix [Form of Deed of Charge] THIS DEED OF CHARGE is made on 20 BETWEEN: (1) [COUNTERPARTY] of [specify] (the Counterparty ); and (2) CENTRAL BANK OF IRELAND of PO Box 559, Dame Street, Dublin 2 (the Bank ). WHEREAS: The Bank and the Counterparty have entered into a Framework Agreement in respect of Eurosystem Operations secured over Collateral Pool Assets dated [[specify][as of the date of this Deed]] (the Framework Agreement ). This Deed of Charge (this Deed ) is being entered into by the Counterparty in favour of the Bank as security for the payment and performance of obligations of the Counterparty to the Bank, including the Relevant Eurosystem Obligations, and is a Deed of Charge within the meaning of the Framework Agreement. NOW THIS DEED OF CHARGE WITNESSES AND IT IS HEREBY AGREED AND DECLARED as follows: 1. Definitions and interpretation 1.1. In this Deed (including the recital hereto) terms used which are not defined herein but are defined in the Framework Agreement have the meanings given to them in the Framework Agreement and the following expressions shall have the following meanings: Charged Assets means the property, assets and rights of the Counterparty from time to time comprised in or subject to the Security and reference to the Charged Assets includes reference to any part thereof; Collateral Pool Credit Claim has the meaning given to it in the Framework Agreement which, for the avoidance of doubt, shall include reference to any Related Security in respect thereof; Collateral Pool Credit Claim Criteria means, in respect of any Collateral Pool Credit Claim, the Eligibility Criteria applicable thereto; Collateral Pool Credit Claim Documentation means, in respect of any Collateral Pool Credit Claim, the Collateral Pool Credit Claim Collateral Deeds in respect thereof (including, for the avoidance of doubt, any thereof pursuant to which any Related Security is created including those which make up the Counterparty s title to that Related Security);

142 Collateral Regulations means the European Communities (Financial Collateral Arrangements) Regulations 2010; Collateral Regulations Security Interest means an Individual Security Interest that comprises a security financial collateral arrangement within the meaning of the Collateral Regulations; Conveyancing Act means the Land and Conveyancing Law Reform Act 2009; Credit Claim Borrower means, in respect of any Collateral Pool Credit Claim, the borrower thereunder; Credit Claim Guarantee has, in respect of any Guaranteed Collateral Pool Credit Claim, the meaning given to it in the definition of Guaranteed Collateral Pool Credit Claim ; Credit Claim Guarantor has, in respect of any Guaranteed Collateral Pool Credit Claim, the meaning given to it in the definition of Guaranteed Collateral Pool Credit Claim ; Delegate means, in respect of any person, any delegate, agent, manager, attorney, co-trustee or other professional advisers and contractors appointed by that person (including, in each case, its employees and agents and any sub-delegate appointed by any Delegate having the power to sub-delegate); Fixed Charge Assets means, at any time, the assets then effectively charged to the Bank by way of first fixed charge pursuant to this Deed; Floating Charge means the floating charge created by clause 3.2; Floating Charge Assets means, at any time, any Charged Assets that are not Fixed Charge Assets; Guaranteed Collateral Pool Credit Claim means a Collateral Pool Credit Claim that would not, but for the existence of a guarantee of the Credit Claim Borrower s obligations under the Collateral Pool Credit Claim, which guarantee is in existence (the Credit Claim Guarantee and the guarantor thereunder the Credit Claim Guarantor ), comply with the Collateral Pool Credit Claim Criteria; Individual Security Interest has the meaning given to it in clause 7.5(a); Obligor means, in relation to a Collateral Pool Credit Claim, the Credit Claim Borrower in respect thereof and, where the Collateral Pool Credit Claim is a Guaranteed Collateral Pool Credit Claim, the relevant Credit Claim Guarantor; Other Obligation means an obligation of an Obligor or other person to the Counterparty arising other than pursuant to a Collateral Pool Credit Claim; 140

143 parties means the Bank and the Counterparty as the parties to this Deed and party shall be construed accordingly subject, in each case, to any contrary indication; Receiver means a receiver appointed under this Deed or pursuant to statutory powers by the Bank upon the Security becoming enforceable and includes more than one such receiver and any substituted receiver; Related Security means, in relation to a Collateral Pool Credit Claim, any arrangement in place, whether in place at the date on which the Collateral Pool Credit Claim was included in a Collateral Pool Schedule or entered into thereafter, which by its terms is expressed to comprise a guarantee of, indemnity in respect of, or security or other support for, the relevant Credit Claim Borrower s obligations under the Collateral Pool Credit Claim or any of them, regardless of whether it also encompasses other obligations of the Credit Claim Borrower, or obligations of any other person, together with all right, title, benefit and interest ancillary or supplemental to, and all powers and remedies for enforcing, the above; Relevant Document has the meaning given to it in clause 3.4(a); Relevant Jurisdiction means, at any time, a jurisdiction for the purposes of clause 9.1(b)(viii)(B) in respect of the laws of which a legal opinion in form and substance satisfactory to the Bank has been provided pursuant to clause 10; Relevant Obligor Obligations means, in respect of any Collateral Pool Credit Claim, all obligations and liabilities whatsoever of any Obligor from time to time arising in respect thereof; Secured Obligations means all obligations and liabilities whether actual or contingent which are now or shall hereafter become due owing or incurred to the Bank by the Counterparty (either alone or jointly with any other person and whether as principal or surety) in whatsoever currency denominated whether on any account or otherwise in any manner whatsoever, including the Relevant Eurosystem Obligations, together with all costs, charges and expenses (including legal charges on a full indemnity basis) which may be incurred by the Bank in connection with enforcing or obtaining or attempting to enforce or obtain payment from the Counterparty in respect of, or the performance or discharge by the Counterparty of, such obligations and liabilities or any of them in accordance with their terms; Security means the security from time to time constituted by or pursuant to this Deed and each and every part thereof; Syndicated Facility in respect of any Collateral Pool Credit Claim at any time means that it is advanced pursuant to a facility under which there is, at that time, more than one lender; and Taxation includes any tax, levy, impost, duty, deduction or withholding of any nature which the Counterparty is obliged to pay or account for to the Revenue Commissioners or any other agency or instrumentality of government in Ireland In this Deed:

144 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) the headings and the contents page are for ease of reference only and shall not affect its interpretation; clause headings are for ease of reference only; words denoting the singular number only shall include the plural number also and vice versa; words denoting one gender only shall include the other gender; references to clauses, paragraphs or sub-paragraphs shall, unless the context otherwise requires, be to clauses, paragraphs or sub-paragraphs in this Deed; the words hereof, hereunder, herein and similar words shall be construed as references to this Deed as a whole and not limited to the particular clause, paragraph or provision in which the relevant reference appears; the words include and including shall be construed as meaning include without limitation and including without limitation, respectively; references to a company shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or established; references to a person shall be construed so as to include any individual, firm, company, corporation, undertaking, government, state or agency of a state, or any association, body or partnership (whether incorporated or unincorporated and whether or not having separate legal personality); references to any person shall be construed so as to include its Successors and any Successor of such a Successor in accordance with their respective interests provided that reference to any party to a Finance Document in its capacity as such shall include its Successors and assigns only if and to the extent that such succession or assignment is contemplated or permitted herein or by that Finance Document; references to any statute or statutory provision shall unless otherwise stated be to a statute or statutory provision of or applicable in Ireland and shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted or any statutory instrument, order or regulation made thereunder or under any such statutory amendment, modification or re-enactment; references to any European Union legislative provision shall be construed as encompassing, where relevant, reference to: (i) (ii) the same as it may have been, or may from time to time be, amended, replaced or consolidated; any legislative provision amending, replacing or consolidating such provision; and/or 142

145 (iii) any legislative provision, order or regulation implementing such provision or made thereunder; (m) (n) (o) references to any document shall include reference to such document as varied, supplemented, novated or replaced from time to time; references to any cost, charge, expense, fee or liability shall include reference to any value added tax or similar tax charged or chargeable in respect thereof; and references to Ireland shall not include reference to Northern Ireland Section 75 of the Conveyancing Act shall not apply to this Deed. 2. Covenant to pay, perform and discharge 3. Security The Counterparty covenants with the Bank that it will duly and punctually pay, perform and discharge all Secured Obligations in accordance with their terms Fixed Charge The Counterparty as legal and beneficial owner, as continuing security for the payment, performance and discharge of the Secured Obligations, hereby charges to the Bank by way of first fixed charge all of its present and future rights, title, interest and benefit in and to the Counterparty Collateral Account Assets Floating Charge The Counterparty as legal and beneficial owner, as continuing security for the payment, performance and discharge of the Secured Obligations, hereby charges to the Bank by way of first floating charge all of the Counterparty s present and future rights, title, interest and benefit in and to the Other Collateral Pool Assets, excluding CCBM Collateral Assets, (including, in respect of any Collateral Pool Credit Claim and for the avoidance of doubt, all of the Counterparty s rights, title, interest and benefit in and to any Related Security) and the benefit of all covenants relating thereto and any rights or remedies of the Counterparty for enforcing the same Blocked Counterparty Collateral Account The Counterparty irrevocably agrees with, and instructs, the Bank (which instruction the Bank hereby acknowledges and accepts), that: (a) until the Bank is satisfied that there has been a full and final payment, performance and discharge by the Counterparty of all Secured Obligations (whether matured or unmatured and whether actual or contingent), the Counterparty shall not be entitled to: (i) (ii) receive, withdraw, redeem or otherwise transfer or deal in all or any part of the Counterparty Collateral Account Assets; assign, transfer or otherwise dispose of all or any of its rights, title, interest or benefit in or to the Counterparty Collateral Account Assets; or

146 (iii) (iv) give any instructions in respect of the Counterparty Collateral Account Assets, except with the prior written consent of the Bank or as otherwise expressly provided by the Framework Agreement; (b) (c) the Counterparty Collateral Account Assets shall be available to be applied in satisfaction of the Secured Obligations in the manner and at the times provided for in this Deed; and in the event of any inconsistency between the terms of this clause 3.3 and any other provision of any Relevant Document, the terms of this clause 3.3 shall (save to the extent that this clause 3.3(c) is expressly disapplied in respect of such inconsistency in that Relevant Document) prevail to the extent of such inconsistency Set-off Without prejudice to the Security or any right of set-off or any similar right to which the Bank may be entitled at law or in equity, and without prejudice to anything else herein contained, the Bank may (but shall not be obliged), at any time and without notice to or further authorisation from the Counterparty: (a) reduce any amount (the Relevant Amount ) due and payable but unpaid by one party (the Payer ) to the other party (the Payee ) by its set-off against any amount(s) (together the Other Amount ) payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer, in each case: (i) (ii) irrespective of its currency or place of payment, or the booking office of the obligation to pay it; and regardless of whether it arose under any: A. Finance Document; B. other agreement between the Bank and the Counterparty; or C. instrument or undertaking issued or executed by either party with, to, or in favour of, the other, (each, a Relevant Document ). Each of the Relevant Amount and the Other Amount will be discharged promptly and in all respects to the extent that it is so set-off; and (b) combine and consolidate all or any accounts of the Counterparty with the Bank anywhere and in whatever currency or currencies. The Bank will give notice to the Counterparty of any set-off, combination or consolidation effected under this clause 3.4. If an obligation referred to in this clause 3.4 is unascertained, the Bank may in good faith estimate that obligation and set-off in 144

147 respect of the estimate, subject to its accounting to the Counterparty when the obligation is ascertained. For this purpose, in the case of: (i) (ii) clause 3.4(a), either the Relevant Amount or the Other Amount (or the relevant portion of such amounts); and clause 3.4(b), any amount standing to the credit of any such account, may be converted by the Bank into the currency in which the other is denominated No assumption of obligations by the Bank Notwithstanding anything else in any Relevant Document and/or the exercise by the Bank of any rights afforded to it by any Relevant Document: (a) (b) the Bank does not assume, nor shall the Bank be obliged to perform, any obligation or liability of any person arising under any contract, agreement or other document relating to the Charged Assets, nor shall the Bank be obliged to perform any of the obligations or duties of the Counterparty thereunder or in connection therewith or to take any action to collect or enforce any such contract, agreement or other document or obligation or duty arising thereunder or in connection therewith, in each case, pursuant to or otherwise by reason of any Relevant Document; and the Counterparty shall remain liable under any contract, agreement and other document relating to the Charged Assets to perform all of its duties and obligations thereunder to the same extent as if this Deed had not been executed Bank undertaking regarding certain notices The Bank undertakes to the Counterparty that, in respect of any Floating Charge Asset and prior to the earlier of the Enforcement Date and the effective date of the crystallisation of the Floating Charge over that Floating Charge Asset, the Bank will not, and it will not require the Counterparty to: (a) (b) give or cause to be given any notice of the Security as it applies to that Floating Charge Asset to any related Obligor or other person; or take any steps to: (i) apply to register, or effect any registration: A. of any interest of the Bank in any Collateral Pool Credit Claim; or B. in respect of this Deed, at the Land Registry or the Registry of Deeds; or (ii) complete an assignment by way of security of any Collateral Pool Credit Claim Subordination

148 In respect of any Collateral Pool Credit Claim any Related Security of which secures, at any time, any Other Obligation, the Counterparty agrees for the benefit of the Bank that: (a) (b) (c) (d) any proceeds of enforcement of that Related Security received or receivable by or on behalf of the Counterparty shall be applied first to discharge any Relevant Obligor Obligations then due, payable and unpaid and second to discharge the Other Obligations; such Other Obligations, and the rights and remedies of the Counterparty in respect thereof pursuant to that Related Security, shall, as between the Counterparty and the Bank and to the extent set out at paragraph (a) of this clause 3.7, be subject and subordinated to any Relevant Obligor Obligations and to the rights and remedies of the Counterparty in respect thereof; that Related Security will, insofar as it secures Relevant Obligor Obligations and to the extent set out at paragraph (a) of this clause 3.7, rank first in priority to that Related Security insofar as it secures any Other Obligations, which shall rank second in priority; and it will not, other than with the prior written consent of the Bank, take or omit to take any action whereby the ranking and/or subordination arrangements provided for in this clause 3.7 may be impaired or adversely affected. The provisions of: (i) (ii) this clause 3.7 shall, subject to clause 3.7(ii), apply, as between the Counterparty and the Bank, regardless of the terms of any other agreement or other instrument in respect of the Collateral Pool Credit Claim, the Related Security, the Relevant Obligor Obligations and/or any Other Obligations that has been, or may from time to time be, entered into between the Counterparty and the Bank; and paragraphs (b) and (c) of this clause 3.7 shall, in the case of any Collateral Pool Credit Claim advanced under a Syndicated Facility, apply only to the extent that they are not inconsistent with the express terms of the Collateral Pool Credit Claim Documentation. 4. Crystallisation of Floating Charge 4.1. The Bank may, at any time after the occurrence of an Event of Default or any exercise by it of its rights under clause 9.3 of the Framework Agreement to require the Counterparty to discharge the Relevant Eurosystem Obligations then outstanding, by notice in writing to the Counterparty convert the Floating Charge with immediate effect into a fixed charge as regards any Floating Charge Assets specified in the notice (or, if none is specified, all Floating Charge Assets) whereupon all provisions of this Deed relating to Fixed Charge Assets, including clause 6.1, shall apply thereto Notwithstanding clause 4.1 and without prejudice to any rule of law which may have a similar effect, the Floating Charge shall automatically be converted with immediate 146

149 effect into a fixed charge as regards all the Floating Charge Assets and without notice from the Bank to the Counterparty if: (a) without the Bank s prior written consent: (i) (ii) any distress, attachment, sequestration, execution or other process is levied, enforced, sued on or against any Charged Assets, or any attempt is made to do so; or a receiver (other than a Receiver) or analogous official is appointed to any Charged Assets; or the Counterparty breaches any of its obligations under clause 6.1, whereupon all provisions of this Deed relating to Fixed Charge Assets, including clause 6.1, shall apply thereto Where the Floating Charge has crystallised under clause 4.2, it may be reconverted into a floating charge by written notice given at any time by the Bank to the Counterparty, in respect of the Charged Assets specified in such notice, whereupon such Charged Assets shall be deemed to comprise Floating Charge Assets for all purposes of this Deed The Bank shall, upon receipt of a request to that effect from the Counterparty made in accordance with such procedures and at such intervals as may from time to time be agreed between the Bank and Counterparty, confirm (if such is the case) in writing to the Counterparty or such person(s) as the Counterparty may specify that: (a) (b) so far as the Bank is aware no event has happened whereby the Floating Charge has converted; and the Bank has not taken any action pursuant to this Deed to convert the Floating Charge, into a fixed charge as regards any, or certain specified, Floating Charge Assets. 5. Release of Security 5.1. Upon the Bank being satisfied that there has been a full and final payment, performance and discharge by the Counterparty of the Secured Obligations (matured and unmatured, actual and contingent), the Bank at the request and cost of the Counterparty shall, subject to the rights and claims of any person having prior rights thereto, release or otherwise discharge the Charged Assets from the Security, subject to clause No assurance, security or payment which may be avoided or adjusted under any applicable law, and no release, settlement or discharge given or made by the Bank or any Receiver on the faith of any such assurance, security or payment, shall prejudice or affect the right of the Bank or any Receiver to recover from the Counterparty (including any monies which it may be compelled by due process of law to refund pursuant to the provisions of any law relating to liquidation, bankruptcy, insolvency or

150 creditors rights generally and any costs payable by it or otherwise incurred in connection with such process) or to enforce the Security to the full extent of the Secured Obligations or to exercise any other rights pursuant to this Deed 5.3. Without prejudice to any other right of the Bank to cease to maintain the Counterparty Collateral Account pursuant to the Framework Agreement or otherwise and notwithstanding any provision of any other agreement between the parties to the contrary, the Bank shall be entitled, but not obliged, to cease to maintain the Counterparty Collateral Account upon the release and discharge by it of the Security referred to at clause 5.1. On cessation of the Counterparty Collateral Account facilities, and subject to the Bank being satisfied that there has been a full and final payment, performance and discharge by the Counterparty of the Secured Obligations (matured and unmatured, actual and contingent), the Bank will, subject to any applicable law and regulation, to any applicable provision of any other agreement between it and the Counterparty and the rights and claims of any person having prior rights thereto, pay or transfer as applicable to the Counterparty: (a) (b) an amount in euro equal to the Counterparty Collateral Account Cash Balance, other than any thereof representing a Fixed-Term Deposit the Maturity Date in respect of which has not yet occurred; and marketable assets equivalent to the Counterparty Collateral Account Marketable Assets Balance, on or as soon as practicable after the day of cessation, subject to the Bank having received from the Counterparty on a timely basis any account details required to enable it to effect that transfer. Interest shall not, if would otherwise be payable on any Counterparty Collateral Account Cash Balance, other than any thereof representing a Fixed-Term Deposit, be payable after cessation of the Counterparty Collateral Account facilities Any release or discharge of the Security or of any of the Secured Obligations shall not release or discharge the Counterparty from any liability to the Bank for the same or any other obligations which may exist independently of this Deed. 6. Negative pledge 6.1. During the subsistence of the Security, otherwise than with the prior written consent of the Bank, the Counterparty shall not: (a) (b) create or attempt to create or permit to arise or subsist any Encumbrance on or over the Charged Assets or any part thereof, other than an Encumbrance in favour of the Bank; sell, transfer, lend or otherwise dispose of or deal in the Fixed Charge Assets or any part thereof or, in each case, attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one time or over a period of time; and 148

151 (c) otherwise than in the ordinary course of business (and provided that (i) no Event of Default or event that, with the giving of notice or the lapse of time or both would constitute an Event of Default has occurred (ii) the Floating Charge over the relevant Floating Charge Assets has not crystallised without being reconverted into, and continuing in effect as, a floating charge), sell, transfer, lend or otherwise dispose of or deal in the Floating Charge Assets or any part thereof, or redeem, agree to redeem or accept repayment in whole or in part of any Collateral Pool Credit Claim, or enforce or release any Related Security or, in each case, attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one time or over a period of time provided that: (i) (ii) nothing in this clause 6.1 shall constitute a waiver of any other obligation of the Counterparty, or of any right, power, remedy or privilege of the Bank, whether or not arising pursuant to this Deed; and notwithstanding the aforesaid, the Counterparty shall not, otherwise than with the prior written consent of the Bank, release any Credit Claim Guarantee while the related Collateral Pool Credit Claim forms part of the Floating Charge Assets None of the prohibitions in clause 6.1 shall be construed as limiting any powers exercisable by any Receiver appointed by the Bank under or pursuant to this Deed If the Bank shall at any time receive or be deemed to have received notice of any Encumbrance affecting the whole or any part of the Charged Assets or any assignment, transfer, loan or disposal thereof, or dealing therein, which is prohibited by, or would otherwise result in a breach by the Counterparty of, the terms of this Deed: (a) (b) the Bank may open a new account or accounts for the Counterparty in its books; and if the Bank does not in fact open any such new account, then unless it gives express written notice to the Counterparty to the contrary, it shall be treated as if it had in fact opened such account or accounts at the time when it received or was deemed to have received such notice, and as from such time and unless such express written notice shall be given to the Counterparty, all payments by or on behalf of the Counterparty to the Bank shall be credited or treated as having been credited to such new account or accounts and not as having been applied in reduction of the Secured Obligations at such time. 7. Enforcement of Security 7.1. All monies and assets received or recovered by the Bank in respect of the Secured Obligations or the Charged Assets (in the case of any Floating Charge Asset, on or after the earlier of the Enforcement Date and the effective date of crystallisation of the Floating Charge over that Floating Charge Asset), including monies received pursuant to clause 14.10, shall be held by or on behalf of the Bank and all monies and assets received by the Counterparty in respect of the Charged Assets (in the case of any Floating Charge Asset, on or after the earlier of the Enforcement Date and the

152 effective date of crystallisation of the Floating Charge over that Floating Charge Asset), other than monies received pursuant to clause 7.2, shall forthwith be paid to (and, pending such payment, the Counterparty shall hold such monies and assets on trust for) the Bank On or after the Enforcement Date, all monies and, where relevant, assets arising from the exercise of the powers of enforcement of the Security shall be applied, after the discharge of all sums, obligations and liabilities having priority thereto, if any, in the following order of priority: (a) (b) (c) (d) first, in or towards satisfaction, pro rata according to their respective terms, of all amounts due and payable to the Bank and any Receiver in respect of their fees, costs and expenses as referred to in clause 11; second, in the payment, performance and discharge of any liabilities reasonably incurred or payable by or on behalf of a Receiver, whether on his own account or on behalf of the Counterparty, or the Bank, in each case in the exercise of any of its powers under this Deed or the Conveyancing Act, including the costs of realisation of any part of the Charged Assets (in the case of a Receiver, in respect of which he was appointed); third, to the Bank in respect of all amounts due and payable as Secured Obligations; and fourth, the surplus (if any) to the Counterparty or other person entitled thereto All monies from time to time received by the Bank from the Counterparty or any person or persons or body corporate liable to pay the same or from any Receiver or otherwise on the realisation or enforcement of the Security may be applied by the Bank either as a whole or in such proportions as the Bank shall think fit to any account or item of account or any transaction to which the same may be applicable The provisions of clauses 7.1, 7.2, 7.3 and shall take effect as and by way of variation to the provisions of sections 106(3), 107 and 109 of the Conveyancing Act which provisions as so varied and extended shall be deemed incorporated in this Deed and as regards section 109 as if they related to a receiver of the Charged Assets and not merely a receiver of the income thereof The Counterparty agrees that: (a) (b) the Security shall, at any given time, comprise in respect of each separate right, title, interest and benefit of the Counterparty comprising the Charged Assets, a separate charge and security interest (in respect of such right, title, interest or benefit, as applicable, an Individual Security Interest ); and without limiting the other rights and remedies of the Bank pursuant to this Deed or otherwise, the Bank is entitled to realise any Charged Asset the subject of any Collateral Regulations Security Interest by appropriating it and 150

153 8. Continuance of Security setting off its Nominal Value against, or applying that Nominal Value in discharge of, the Secured Obligations. For this purpose, any such Nominal Value or Secured Obligations (or the relevant portion of any thereof) may be converted by the Bank into the currency in which the other is denominated. For the avoidance of doubt, the Counterparty agrees that the method of determining the Nominal Value provided for in the Framework Agreement is a commercially reasonable method of valuation for the purposes of the Collateral Regulations. Without prejudice to the generality of clause 2, this Deed shall remain in force as a continuing security to the Bank notwithstanding any settlement of account or any other act, event or matter whatsoever, and shall not be discharged, except only by the execution by the Bank of a deed of absolute and unconditional release. 9. Representations, warranties and covenants by the Counterparty 9.1. The Counterparty represents and warrants to the Bank: (a) on the date hereof, each of which will be deemed repeated on each day on which a Finance Document is entered into, that: (i) (ii) it is a body corporate duly incorporated under the laws of the Counterparty Jurisdiction with power to enter into, and to exercise its rights and perform its obligations, under the Finance Documents; it has duly taken all corporate and other action and received the consent of any third party that is required; A. to authorise its execution of, and the performance of its obligations under, the Finance Documents; and B. to ensure the validity and enforceability in accordance with its terms of the Finance Documents (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances and the time barring of claims); (iii) (iv) (v) in any proceedings taken in relation to the Finance Documents, it will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process; the obligations expressed to be assumed by it in the Finance Documents are legal and valid obligations binding on it in accordance with the terms hereof (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances and the time barring of claims); and it has not taken any corporate action nor have any other steps been taken nor legal proceedings been started or threatened against it for its winding-up, dissolution or re-organisation or for the appointment of a receiver, an administrator, administrative receiver, examiner, trustee or similar officer of it or of any or all of its assets or revenues;

154 (b) on the date hereof and in respect of each Charged Asset, each of which will be deemed repeated on a continuing basis, that: (i) (ii) (iii) (iv) (v) (vi) (vii) such Charged Asset complies with the Eligibility Criteria applicable to the category of assets to which it belongs; it has the capacity to create the Security over such Charged Asset in accordance with the terms of this Deed; it has taken all necessary steps to enable it to create the Security over such Charged Asset in accordance with the terms of this Deed; it is the absolute legal and beneficial owner of such Charged Asset, free and clear of any Encumbrance other than an Encumbrance in favour of the Bank; the Bank has acquired a valid security interest in such Charged Asset in accordance with the terms of this Deed; and it has not taken, or omitted to take, any action or step as a result of which the Bank s right, title, interest and benefit in and to such Charged Asset is prejudiced; where information in respect of such Charged Asset is required to be included in the Collateral Pool Schedule, the information in respect thereof set out in the Collateral Pool Schedule most recently furnished to the Bank was complete, true and accurate in all material respects as at the expressed effective date of that Collateral Pool Schedule; (viii) where such Charged Asset comprises a Collateral Pool Credit Claim: A. that, if any Related Security in respect of a Collateral Pool Credit Claim secures, at any time, any Other Obligation, the existence of such Other Obligation does not adversely affect the creation or enforceability of the Security as it applies to any Collateral Pool Credit Claim; and B. each Obligor is incorporated or otherwise organised under the laws of a Relevant Jurisdiction, unless such Obligor is, in accordance with the applicable Eligibility Criteria, a natural person or a group of natural persons the organisation of whom is not required, pursuant to the applicable Eligibility Criteria, to be effected pursuant to the laws of any particular jurisdiction(s); and C. each Obligor is acting for the purpose of the Collateral Pool Credit Claim out of a Relevant Jurisdiction The Counterparty covenants with the Bank that it shall: (a) not take any action or step, or omit to take any action or step, excluding any step or omission expressly authorised pursuant to this Deed, as a result of 152

155 which the validity or effectiveness or enforceability of this Deed or the priority of the Security shall be amended, terminated, postponed or discharged; (b) (c) (d) (e) (f) (g) (h) ensure that all applicable perfection and registration requirements in all relevant jurisdictions in connection with the Security are complied with and, in particular but without limiting the foregoing, that if it is a company to which section 99 or section 111 of the Companies Act 1963 applies that particulars of the Security, including details of the negative pledge covenant contained in clause 6, will be registered in accordance with such section within 21 days of the date hereof and that if it is not such a company but is subject to any obligation to register any particulars of this Deed and/or the Security, or any part thereof, under any other law and/or under its internal constitutional documents such corresponding particulars will be duly registered in accordance with the provisions of such law and/or such documents; obtain the prior written consent of the Bank (which consent shall not be arbitrarily withheld) to any disclosure by the Counterparty of, and make such disclosure as the Bank may reasonably require (including in the Counterparty s annual financial statements) regarding, the existence, or any of the content of, any Finance Document; pay any and all stamp duty payable in connection with execution and, where relevant, delivery of any Finance Document on or before the due dates for payment thereof; pay all amounts it is liable to pay in respect of Taxation and local rates upon the due dates for payment thereof (or, in the event of the amount payable being the subject of contest or dispute in good faith, when the amount thereof has been determined); maintain records in a computer readable form or otherwise of all information in relation to each Collateral Pool Credit Claim necessary to administer and/or enforce each such Collateral Pool Credit Claim (but taking into account, in the case of a Collateral Pool Credit Claim advanced pursuant to a Syndicated Facility, the administration arrangements provided for in the Collateral Pool Credit Claim Documentation) and shall ensure that each Collateral Pool Credit Claim is segregated at all times; maintain for, and on request permit, the inspection at any time upon reasonable notice of the Collateral Pool Schedule by any person to whom it assigns, transfers, novates or otherwise disposes of, or may potentially assign, transfer, novate or otherwise dispose of, any of its rights and/or obligations in any asset; permit the Bank at any time upon reasonable notice: (i) (ii) to have access to all Collateral Pool Credit Claim Documentation and other books of record, accounts and other relevant records relating to the administration of the Collateral Pool Credit Claims and related matters in accordance with the provisions of the Finance Documents; and to inspect the Counterparty s records and computer system, insofar as they relate to Collateral Pool Credit Claims, and the manner in which

156 Collateral Pool Credit Claims are segregated and the Collateral Pool Credit Claim Documentation is held; (i) at the request of the Bank: (i) (ii) permit the Bank or any person on its behalf to carry out, or procure the carrying out by a third party or third parties; or procure the carrying out by a third party or third parties acceptable to the Bank (in order to provide to the Bank a report in a form and in substance acceptable to the Bank), of such audit or other evaluation of: A. the Counterparty s compliance with its obligations, including of the Counterparty s records and computer system and the manner in which Collateral Pool Credit Claims are segregated and the Collateral Pool Credit Claim Documentation is held; and/or B. the accuracy of any information provided by the Counterparty, under any Finance Document as the Bank may require; (j) (k) (l) maintain the Collateral Pool Credit Claim Documentation identifiable and distinguishable from the documentation evidencing any other loans and related credit support which are held by or on behalf of or administered by the Counterparty and, subject to the other provisions of the Finance Documents, keep, hold and/or deal with the Collateral Pool Credit Claim Documentation in the same manner as the Counterparty keeps, holds and deals with the documentation relating to loans advanced by it and related credit support which do not at the relevant time comprise Collateral Pool Credit Claim Documentation. For the avoidance of doubt it is hereby confirmed that there is no requirement for such Collateral Pool Credit Claim Documentation to be physically segregated; maintain in Ireland all Collateral Pool Credit Claim Documentation and other books of record, accounts and other relevant records relating to the administration of the Collateral Pool Credit Claims and related matters, other than such records as may be agreed in writing by the Bank; on or after the earlier of the Enforcement Date and the effective date of the crystallisation of the Floating Charge over any right, title, interest or benefit of the Counterparty in the relevant Collateral Pool Credit Claim, deliver the Collateral Pool Credit Claim Documentation (or, in the case of any Collateral Pool Credit Claim Documentation relating to a Collateral Pool Credit Claim advanced under a Syndicated Facility, procure that such control, access and possession of such Collateral Pool Credit Claim Documentation as is available to the Counterparty in accordance with the terms thereof is instead made available) to, or to the order of, the Bank on the written request of the Bank; 154

157 (m) (n) (o) duly and punctually perform and observe all its obligations in connection with the Charged Assets under any present or future statute or any regulation, order or notice made or given thereunder; at all times during the subsistence of the Security and unless otherwise agreed with, or directed by, the Bank pursuant to (and in accordance with the terms of) the Finance Documents, administer the Collateral Pool Credit Claims and all related matters in the same manner as it administers all other assets and related matters of the same type and in respect of which it is the sole beneficial owner and which are not subject to the Security or any other Encumbrance (and, for the avoidance of doubt, in the case of a Collateral Pool Credit Claim advanced pursuant to a Syndicated Facility, taking into account the administration arrangements provided for in the Collateral Pool Credit Claim Documentation); and provide to the Bank such information and notifications in respect of, or otherwise in connection with, Collateral Pool Credit Claims as may from time to time be specified in the MPIPs Document, which specification may from time to time be amended by notice from the Bank to the Counterparty or supplemented by guidance issued by the Bank to the Counterparty. 10. Legal opinion The Counterparty shall procure at its own expense the delivery to the Bank, on the date of this Deed and/or such other date(s) as the Bank may notify to the Counterparty, such: (a) (b) one or more opinions in respect of this Deed from legal advisers acceptable to the Bank and in form and substance satisfactory to the Bank; and results of searches in such public registers and offices, as the Bank notifies to the Counterparty, in advance of such date, are required. Any notification from the Bank to the Counterparty referred to in this clause 10.1 may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof The Counterparty and the Bank may agree that, in respect of any legal opinion or results of searches required by the Bank: (a) (b) the Bank will procure the delivery to it of such opinion or results of searches; and the Counterparty will pay or reimburse to the Bank all the Bank s reasonable costs and expenses incurred in procuring that delivery. 11. Fees and expenses The Counterparty covenants with the Bank in respect of each Finance Document and any other Relevant Document pursuant to which Secured Obligations may be incurred that it will:

158 (a) (b) pay and bear its own costs and expenses incurred in connection therewith (including in connection with any audit or other evaluation or report referred to in clause 9.2(i)); pay, discharge or reimburse to the Bank all reasonable costs, charges, liabilities and expenses (including legal expenses) incurred by the Bank or any Delegate of the Bank under or in connection therewith, in connection with: (i) (ii) (iii) (iv) (v) (vi) the preparation, negotiation, execution and delivery thereof; the enforcement of any of the Bank s rights thereunder; the exercise, or the attempted or purported exercise, or the consideration of the exercise, by or on behalf of the Bank or any Receiver of any of the powers of the Bank or any Receiver where such exercise is permitted pursuant to the provisions thereof; the perfection or protection of the Security where permitted or required in accordance therewith; any audit or other evaluation or report referred to in clause 9.2(i); and compliance by the Bank with any request referred to in clause 4.4; and (c) pay, discharge or reimburse to any Receiver all reasonable costs, charges, liabilities and expenses (including legal expenses) incurred by the Receiver in connection with the exercise, or the attempted or purported exercise, or the consideration of the exercise, by or on behalf of that Receiver of any of the powers of that Receiver where such exercise is permitted pursuant to the provisions of this Deed. 12. Restriction of liability of Counterparty 13. The Bank 156 The Counterparty shall have no liability for any obligation of an Obligor under any Collateral Pool Credit Claim and nothing in this Deed shall constitute a guarantee by, or similar obligation of, the Counterparty of or in respect of any such Obligor or Collateral Pool Credit Claim Notwithstanding anything contained in this Deed, the exercise by the Bank of the powers and rights conferred on it by virtue of the provisions of Chapter 3 of Part 10 of the Conveyancing Act shall not be subject to any restriction on such exercise contained in section 96(1)(c) of the Conveyancing Act and upon the Enforcement Date this Deed shall become immediately enforceable and the powers conferred on the Bank and any Receiver by this Deed shall become immediately exercisable The restrictions on the power of sale contained in section 100 of the Conveyancing Act (and, therefore, the related provisions of section 101 of the Conveyancing Act) shall not apply to this Deed. The provisions of the Conveyancing Act relating to the power of sale and the other powers conferred by section 100 of

159 the Conveyancing Act (without the restrictions contained therein) are hereby extended (as if such extensions were contained in the Conveyancing Act) to authorise the Bank at its absolute discretion and upon such terms as it may think fit: (a) (b) (c) (d) (e) (f) (g) (h) to sell by public auction or private contract, let, surrender or accept surrenders, grant licences or otherwise dispose of or deal with any of the Charged Assets, or any interest in the same, and to do so for shares, debentures or any other securities whatsoever, or in consideration of an agreement to pay all or part of the purchase price at a later date or dates, or an agreement to make periodical payments, whether or not the agreement is secured by an Encumbrance or a guarantee, or for such other consideration whatsoever as the Bank may think fit, and also to grant any option to purchase, and to effect exchanges, and nothing shall preclude the Bank from making any disposal to any person it thinks fit; with a view to, or in connection with, the disposal of the Charged Assets, to carry out any transaction, scheme or arrangement which the Bank may in its absolute discretion consider appropriate; insofar as it does not already have possession thereof, to take possession of, get in and collect the Charged Assets and the restrictions on taking possession of mortgaged property contained in section 97 of the Conveyancing Act (and, therefore, the related provisions of section 101 of the Conveyancing Act) shall not apply to this Deed and, further, section 99(1) of the Conveyancing Act shall not apply to this Deed and any obligations imposed on mortgagees in possession or receivers by virtue of the application of section 99(1) shall not apply to the Bank or any Receiver; to appoint and engage Delegates upon such terms as to remuneration and otherwise and for such periods as it may determine, and to dismiss them; in connection with the exercise, or the proposed exercise, of any of its powers to borrow or raise money from any person, without security or on the security of the Charged Assets (either in priority to this security or otherwise) and generally in such manner and on such terms as it may think fit; to bring, defend, submit to arbitration, negotiate, compromise, abandon and settle any claims and proceedings concerning the Charged Assets; to transfer all or any of the Charged Assets to any other person, whether or not formed or acquired for the purpose and whether or not a Subsidiary or associated company of the Bank or a company or other person in which the Bank has an interest; without any consent by or notice to the Counterparty: (i) to exercise on behalf of the Counterparty all the powers and provisions conferred on a landlord or a tenant by any legislation from time to time in force relating to rents or otherwise in respect of any part of the Charged Assets but without any obligation to exercise any of such powers and without any liability in respect of powers so exercised or omitted to be exercised; and

160 (ii) to exercise for and on behalf of the Counterparty and in the name of the Counterparty all powers and rights of the Counterparty relevant to and necessary to effect the registration in the Land Registry or the Registry of Deeds of the crystallisation of the Floating Charge over any Floating Charge Asset and/or the appointment of a Receiver hereunder; (i) (j) (k) generally to carry out, or cause or authorise to be carried out, any transaction, scheme or arrangement whatsoever, whether similar or not to any of the foregoing, in relation to the Charged Assets which it may consider expedient as effectually as if it were solely and absolutely entitled to the Charged Assets; in connection with the exercise of any of its powers, to execute or do, or cause or authorise to be executed or done, on behalf of or in the name of the Counterparty or otherwise, as it may think fit, all documents, acts or things in relation to the Charged Assets which it may consider appropriate; and to pay and discharge out of the profits and income of the Charged Assets and the monies to be made by it in carrying on any such business as aforesaid the expenses incurred by it in the exercise of any of the powers conferred by this clause 13 or otherwise in respect of the Charged Assets and all outgoings which it shall think fit to pay The notification requirement contained in section 103(2) of the Conveyancing Act shall not apply to this Deed The Bank shall be entitled to rely on the opinion or advice of any professional or financial or other advisers selected by it which is given in connection with the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred and shall not be liable to the Counterparty for any of the consequences of such reliance or for relying on any communication or document believed by it to be genuine and correct and to have been communicated or signed by the person by whom it purports to be communicated or signed The Bank shall (save as expressly otherwise provided in this Deed) as regards all rights, powers, authorities and discretions vested in it by the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred, or by operation of law, have complete discretion as to the exercise or nonexercise thereof Any consent given by the Bank for the purposes of the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred may be given on such terms and subject to such conditions (if any) as the Bank thinks fit and, notwithstanding anything to the contrary contained in this Deed, any Finance Document or any other Relevant Document, may be given retrospectively The Bank shall not be under any obligation to effect or to require any other person to maintain insurance in respect of any of the Charged Assets. If the Bank in 158

161 14. Receiver its absolute discretion effects insurance in respect of the Charged Assets it shall not be subject to the requirements contained in section 110(2) of the Conveyancing Act At any time on or after the Enforcement Date the Bank may appoint such person or persons as it thinks fit to be receiver or receivers (to act jointly or severally) of the Charged Assets The restrictions contained in section 108(1) of the Conveyancing Act shall not apply to this Deed The Bank may remove any Receiver appointed by it whether or not appointing another in his place, and the Bank may also appoint another receiver if any Receiver resigns or to act jointly with any other Receiver The exclusion of any part of the Charged Assets from the appointment of any Receiver shall not preclude the Bank from subsequently extending his appointment (or that of any Receiver replacing him) to that part A Receiver shall, so far as the law permits, be the agent of the Counterparty and the Counterparty shall be solely responsible for his acts and defaults and liable on any contracts or engagements made or entered into by him; and in no circumstances whatsoever shall the Bank be in any way responsible for any misconduct, negligence or default of a Receiver The remuneration of a Receiver may be fixed by the Bank (and may be or include a commission calculated by reference to the gross amount of all money and/or other assets received or otherwise) and section 108(7) of the Conveyancing Act shall not apply to the commission and/or remuneration of a Receiver appointed pursuant to this Deed, but such remuneration shall be payable by the Counterparty alone. Without prejudice to the foregoing, the Bank may, but shall not be obliged to, pay such remuneration or any part thereof. The Counterparty agrees that it will pay to the Bank an amount equal to any such payment made by it, together with the Bank s cost of funding such payment until such payment by the Counterparty, which liability of the Counterparty shall, for the avoidance of doubt, form part of the Secured Obligations and shall accordingly be secured on the Charged Assets pursuant to this Deed A Receiver may be invested by the Bank with such of the powers, authorities and discretions exercisable by the Bank under this Deed as the Bank may think fit. Such investiture shall, for the avoidance of doubt, be without prejudice to the provisions of clause A Receiver shall in the exercise of his powers, authorities and discretions conform to any lawful regulations and directions from time to time made and given by the Bank.

162 14.9. The Bank may from time to time and at any time require any Receiver to give security for the due performance of his duties as such Receiver and may fix the nature and amount of the security to be so given but the Bank shall not be bound in any case to require any such security Save so far as otherwise directed by the Bank all monies and assets from time to time received by a Receiver and constituting Charged Assets shall be paid or otherwise transferred, as applicable, over to the Bank to be held by it upon the terms and subject to the provisions of clause The Bank may pay or otherwise transfer, as applicable, over to a Receiver any monies or other assets constituting Charged Assets to the intent that the same may be applied for the purposes of this Deed by that Receiver The Bank may from time to time determine what funds a Receiver shall be at liberty to keep in hand with a view to the performance of his duties as such Receiver The provisions of this clause 14 shall take effect as and by way of variation to the provisions of section 108 of the Conveyancing Act which provisions as so varied and extended shall be deemed incorporated in this Deed as if they related to a receiver of the Charged Assets and not merely a receiver of the income thereof If at any time any two or more persons shall hold office as Receivers of the same part of the Charged Assets, each one of such Receivers shall be entitled (unless the contrary shall be stated in the instrument appointing him) to exercise all the powers and discretions hereby conferred on Receivers individually as well as jointly and to the exclusion of the other or others of them. 15. Protection of third parties The statutory powers of sale and of appointing a receiver which are conferred upon the Bank as varied and extended by this Deed and all other powers shall in favour of any purchaser be deemed to arise and be exercisable immediately after the execution of this Deed No purchaser from, or otherwise dealing with, the Bank and/or a Receiver shall be concerned to enquire whether any of the powers which they have exercised or purported to exercise has arisen or become exercisable, or whether the Secured Obligations remain outstanding or whether any event has happened to authorise that Receiver to act or as to the propriety or validity of the exercise or purported exercise of any such power; and the title and position of a purchaser shall not be impeachable by reference to any of those matters and all the protections for purchasers contained in the Conveyancing Act (including pursuant to sections 104, 105 and 106(1)) shall apply to any such purchaser. 160

163 15.3. The receipt of the Bank or any Receiver shall be an absolute and conclusive discharge to a purchaser and shall relieve him of any obligation to see to the application of any monies or other assets paid or transferred to or at the direction of the Bank or any Receiver In this clause 15 purchaser includes any person acquiring for money or other consideration, any lease of, or encumbrance over, or any other interest or right whatsoever in relation to, the Charged Assets. 16. Protection of the Bank and Receiver Neither the Bank nor any Receiver shall be liable in respect of any loss or damage which arises out of the exercise or attempted or purported exercise of, or the failure to exercise, any of their respective powers, unless and to the extent only that such loss or damage is caused by its or his negligence, wilful default, fraud or breach of obligations under this Deed. The provisions of this clause 16.1 shall be applicable also to any Delegate of the Bank as is mentioned in clause In this clause 16.1, a reference to negligence of a person means the failure by that person to exercise the level of skill, care and diligence in the exercise of the relevant power reasonably to be expected of a person exercising the same or similar powers Without prejudice to clause 16.1, entry into possession of the Charged Assets shall not render the Bank or any Receiver liable to account as mortgagee in possession or to be liable for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable; and if and whenever the Bank or a Receiver enters into possession of the Charged Assets, it shall be entitled at any time to go out of such possession. The Bank and any Receiver will exercise only such reasonable care to assure the safe custody of Charged Assets to the extent required by applicable law. Except as specified in the preceding sentence, neither the Bank nor any Receiver will have any duty with respect to the Charged Assets including any duty to collect any distributions The Bank may, in the execution of all or any of the trusts, powers, authorities and discretions vested in it by the Finance Documents and any other Relevant Document pursuant to which Secured Obligations may be incurred, act by responsible officers or a responsible officer for the time being of the Bank. The Bank may also whenever it thinks expedient whether by power of attorney or otherwise, for a period not exceeding 12 months, delegate to any person or persons all or any of the trusts, rights, powers, duties, authorities and discretions vested in it by the Finance Documents and or any other Relevant Document pursuant to which Secured Obligations may be incurred or appoint any Delegate in respect thereof. Any such delegation or appointment may be made upon such terms and conditions and subject to such regulations (including power to sub-delegate) as the Bank may think fit. The Bank shall give, or procure the giving of, prompt notice to the Counterparty of the appointment of any Delegate as aforesaid.

164 16.4. The Bank shall not, and no director, officer or Delegate of the Bank shall, be in any way precluded from making any contracts or entering into any transactions in the ordinary course of business with any Obligor The powers conferred by this Deed upon the Bank shall be in addition to any powers which may from time to time be vested in it by general law. 17. Further assurances The Counterparty covenants with the Bank and every Receiver from time to time upon written demand to execute, at its own cost, any document or do any act or thing, and execute such notices (and procure the delivery to the Bank or Receiver, as applicable, of an acknowledgement of receipt of any such notice which may be specified by the Bank or a Receiver) and such legal or other assignments, transfers, mortgages, charges, securities and other documents as: (a) the Bank or a Receiver shall reasonably specify (subject always to clause 3.6), in such form as the Bank or that Receiver, as applicable, may reasonably require, for or in connection with the improvement, perfection, protection or maintenance of the Security, or as may be necessary or reasonable to give full effect to the arrangements contemplated by this Deed. Without prejudice to the generality of the foregoing, the Counterparty shall, if so requested by the Bank or a Receiver, do any act or execute any document which may be necessary or desirable under the laws of any jurisdiction that the Bank or that Receiver, as applicable, in its absolute discretion, is of the opinion is relevant to the Charged Assets or the Security in order to confer on the Bank security over such Charged Assets equivalent or similar to the Security or to facilitate the realisation thereof or the exercise of any or all of the powers, authorities and discretions conferred on the Bank or any Receiver by or pursuant to this Deed, or as may be necessary or reasonable to give full effect to the arrangements contemplated by this Deed; or (b) the Bank or a Receiver may reasonably specify with a view to facilitating the exercise, or the proposed exercise, of any of their respective powers The Counterparty shall, subject always to clause 3.6, take all such action as is available to it: (a) (b) to perfect, protect, improve and maintain the Security; and to make all such filings and registrations and to take all such other steps as may be necessary in connection with the creation, perfection, protection or maintenance of the Security and any other security which it may, or may be required to, create in connection herewith The Counterparty hereby by way of security for the performance of the Secured Obligations irrevocably appoints the Bank to be the attorney of the Counterparty to do any acts, matters or things which the Bank considers, subject always to clause 3.6, in each case necessary or desirable for the protection or 162

165 preservation of the Bank s interest in the Charged Assets or which ought to be done under the provisions of the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred and in its name or otherwise and on its behalf and as its act and deed to sign, seal, execute, deliver, perfect and do all deeds, instruments, acts and things which the Counterparty may or ought to do under the covenants and provisions contained in the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred and generally in its name and on its behalf to exercise all or any of the powers, authorities and discretions conferred by or pursuant to: (a) (b) the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred; or any statute or common law, on the Bank or any Receiver or which may be required or which the Bank shall deem fit for carrying any sale, lease, charge, mortgage or dealing by the Bank or by any Receiver into effect or for giving to the Bank or any Receiver the full benefit of the Finance Documents or any other Relevant Document pursuant to which Secured Obligations may be incurred and generally to use the name of the Counterparty in the exercise of all or any of the powers, authorities or discretions conferred on the Bank or any Receiver and the Counterparty hereby ratifies and confirms and agrees to ratify and confirm whatsoever any such attorney shall do or purport to do by virtue of this clause 17.3 and all money properly expended by any such attorney shall be deemed to be expenses incurred by the Bank hereunder. 18. Other security etc This security is in addition to, and shall neither be merged in, nor in any way exclude or prejudice, any other Encumbrance, right of recourse or other right whatsoever which the Bank may now or at any time hereafter hold or have (or would apart from this security hold or have) as regards the Counterparty or any other person in respect of the Secured Obligations and shall not be affected by any release, reassignment or discharge of such other Encumbrance Notwithstanding anything to the contrary contained in the Conveyancing Act, the Bank reserves the right to consolidate mortgage securities without restriction The Counterparty shall not take any action under section 94 of the Conveyancing Act in respect of the Charged Assets, this Deed or any monies, obligations and/or liabilities hereby covenanted to be paid, performed or discharged The powers which this Deed confers on the Bank and any Receiver are cumulative, without prejudice to their respective powers under the general law, and may be exercised as often as the Bank or the Receiver thinks appropriate. The Bank or a Receiver may, in connection with the exercise of its powers, join or concur with any person in any transaction, scheme or arrangement whatsoever; and the Counterparty acknowledges that the respective powers of the Bank and a Receiver shall in no circumstances whatsoever be suspended, waived or otherwise prejudiced by anything other than an express waiver or variation in writing.

166 18.5. No failure or delay by any party hereto in exercising any right, power, remedy or privilege under this Deed or available at law shall impair such right, power, remedy or privilege or operate as a waiver of that or any other right, power, remedy or privilege. The single or partial exercise of any right, power or remedy under this Deed or at law shall not preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege under this Deed or at law. The rights, powers, remedies and privileges provided in this Deed are cumulative and not exclusive of any rights and remedies provided by law. 19. Modification, invalidity and transfer No amendment, modification or variation of this Deed shall be effective unless it is in writing and executed by or on behalf of each of the parties hereto If any provision of this Deed becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions of this Deed shall not in any way be affected or impaired. The Bank shall, notwithstanding any other provision of this Deed, be entitled in its absolute discretion (but not, for the avoidance of doubt, obliged) by notice to the Counterparty to replace any such invalid, illegal or unenforceable provisions with an alternative provision that would not result in such an invalidity, illegality or unenforceability and which would, in so far as possible, preserve and uphold the rights and obligations of the parties to this Deed, and the legitimate interests of the Bank, deriving from the original provision The Bank may transfer and assign any or all of its rights, interest and obligations in and under this Deed to any person as the Bank may from time to time determine, and upon such terms and conditions, as it may think fit. The Bank shall be entitled to impart any information concerning the Counterparty to any Successor or proposed Successor or to any person who may otherwise enter into contractual relations with the Bank in relation to this Deed. The Counterparty may not transfer and assign any of its rights, interest and obligations in and under this Deed without the prior written consent of the Bank. 20. Notices Any notices to be given pursuant to this Deed shall be sufficiently served if delivered in accordance with the requirements of the Framework Agreement in respect thereof and shall be deemed served as provided for in the Framework Agreement. 21. Safe custody of documents The Bank hereby undertakes with the Counterparty for the safe custody of such documents of title relating to the Charged Assets of which the Bank retains possession or control. 164

167 21.2. In the event of the loss or destruction of, or injury to, the documents of title relating to the Charged Assets referred to in clause 21.1, the Bank shall have no liability to the Counterparty: (a) if the loss, destruction or injury occurred: (i) (ii) prior to the actual receipt of the documents of title in question by the Bank from the Counterparty or its Delegate; or after the documents of title in question have been given by the Bank to some other person at the written request of the Counterparty and before the documents have been received back by the Bank; or (b) for any damages suffered by the Counterparty as a result of the loss or destruction of, or injury to, the documents of title in question where such damages: (i) (ii) do not directly and naturally result from the loss, destruction or injury, or relate to loss of profit or expected profit from the Counterparty s business or from the development of the Charged Assets This clause 21 shall be regarded as an undertaking for safe custody of documents of title given under section 84 of the Conveyancing Act. 22. No partnership It is hereby acknowledged and agreed by the parties that nothing in this Deed shall be construed as giving rise to any partnership between the parties. 23. Entire agreement This Deed, together with the other Finance Documents and any Relevant Document pursuant to which Secured Obligations are incurred, sets out the entire agreement and understanding between the parties in respect of the creation of the Security. 24. Miscellaneous If, for any purpose pursuant, or related, to: the Finance Documents; or any other Relevant Document pursuant to which Secured Obligations are incurred (unless such Relevant Document expressly provides to the contrary in respect of that purpose), any sum denominated in one currency requires to be converted into another currency on any date the rate of exchange to be used for such purpose shall be: where one of those currencies is euro, the euro reference exchange rate indicated by the European Central Bank on the Business Day before that date or, at the discretion of the Bank, such other rate of exchange as may be selected by the Bank; and

168 in all other cases, such rate of exchange as may be selected by the Bank If any sum due from the Counterparty under the Finance Documents, any other Relevant Document pursuant to which Secured Obligations are incurred or any order or judgment given or made in relation hereto or thereto has to be converted from the currency (the first currency ) in which the same is payable hereunder or under such order or judgment into another currency (the second currency ) for the purpose of: making or filing a claim or proof against the Counterparty; or obtaining an order or judgment in any court or other tribunal; or enforcing any such order or judgment; or applying the same in satisfaction of any of the Secured Obligations, the Counterparty agrees to indemnify and hold harmless the Bank from and against any loss suffered as a result of any discrepancy between: any rate of exchange required to be used for such purpose to convert the sum in question from the first currency into the second currency; and the rate of exchange that would, but for the requirement referred to at paragraph (i) above, have applied pursuant to clause To the extent that any Finance Document or other Relevant Document pursuant to which Secured Obligations are incurred provides for the making of a calculation, valuation or determination by the Bank, it will be made in good faith and, taking into account the circumstances of its making, in a commercially reasonable manner Any certification or determination by the Bank in connection with any Secured Obligation is, in the absence of manifest error, conclusive evidence of the matters to which it relates. 25. Governing law and jurisdiction This Deed (including any non-contractual obligations arising out of or in connection with it) shall be governed by and construed in accordance with the laws of Ireland The Courts of Ireland shall have exclusive jurisdiction (without prejudice to the competence of the Court of Justice of the European Union) to settle any dispute (including claims for set-off and counterclaim) which may arise in connection with the creation, validity, effect, interpretation or performance of this Deed or the legal relationships established by this Deed or otherwise arising in that connection 166

169 (including any non-contractual obligations arising out of or in connection with this Deed or those relationships), and for such purposes the parties hereto irrevocably submit to the jurisdiction of the courts of Ireland. IN WITNESS WHEREOF the parties hereto have caused this Deed to be executed as a deed and delivered on the day and year first above written. 105 [The COMMON SEAL of [COUNTERPARTY] was affixed to this Deed and this Deed was delivered: Director Director/Secretary] The SEAL of CENTRAL BANK OF IRELAND was affixed to this Deed and this Deed was delivered: 105 Execution block to reflect the requirements of constitutive documents and applicable law.

170 IN WITNESS whereof the parties hereto have executed this Agreement the day and year first above written. EXECUTED on behalf of [COUNTERPARTY]: General contact details for [Counterparty]: Address: Facsimile number: Attention: Counterparty Jurisdiction of [Counterparty]: EXECUTED on behalf of CENTRAL BANK OF IRELAND: 168

171 9.2 Framework Agreement in respect of Mortgage-Backed Promissory Notes THIS FRAMEWORK AGREEMENT is made the day of, BETWEEN: (1) [COUNTERPARTY] (the Counterparty ); and (2) CENTRAL BANK OF IRELAND of PO Box 559, Dame Street, Dublin 2 (the Bank ) WHEREAS: (A) The Counterparty carries on the business inter alia of making and administering mortgage loans secured on residential properties within Ireland. (B) The Counterparty may from time to time be indebted to the Bank and/or one or more other Participating NCBs (as hereinafter defined) and/or one or more Eligible Counterparties (as hereinafter defined) in respect of amounts advanced by the Bank and/or such other Participating NCBs and/or such other Eligible Counterparties on foot of Mortgage-Backed Promissory Notes (as hereinafter defined) issued by the Counterparty. (C) Pursuant to a deed of charge which it is intended will be executed by the Counterparty on the date hereof immediately following the execution of this Agreement, the Counterparty will create security over certain mortgage loans, together with the benefit of the collateral security for the same, to secure its obligations under the Mortgage-Backed Promissory Notes. IT IS HEREBY AGREED as follows: 1. Definitions 1.1. In this Agreement, unless the contrary intention appears, the following definitions shall have the following meanings: Agreed Value means such percentage, not being less than one hundred percent (100%), as the Bank may prescribe from time to time of the aggregate nominal value of

172 all Mortgage-Backed Promissory Notes issued to the Bank by the Counterparty which are outstanding at any time; Authorisation means a communication in the form set out in Schedule 2 or in such other form as may be agreed from time to time, which shall be sent by fax (or such other means as may be agreed from time to time) by the Counterparty to the Bank each time a Mortgage-Backed Promissory Note is to be issued, setting out information required for, and constituting an authorisation by the Counterparty for, completion on its behalf of a Mortgage-Backed Promissory Note; Balance means in relation to each and any Loan secured by a Mortgage and identified in a Mortgage Schedule and on any date the original principal amount advanced to the Mortgage Borrower plus any mortgage indemnity premium or other disbursement, legal expense, fee, charge or premium capitalised and added to the amounts secured by the relevant Mortgage in accordance with the Mortgage Conditions applicable to the relevant Loan on or prior to such date and minus all repayments and prepayments of principal made in respect of any such Loan prior to such date; Beneficiary means an entity for which the Bank holds one or more Mortgage-Backed Promissory Notes as nominee and for the account and benefit of such entity and to its order; Business Day means any day on which the Bank is open for conducting Eurosystem monetary policy operations; this will be any day other than Saturdays, Sundays, New Year s Day, Good Friday, Easter Monday, 1 May, Christmas Day and 26 December and any other days as notified from time to time; Counterparty Agreement means an agreement between the Counterparty and an Eligible Counterparty of the kind described in clause 2.1(ii); Direction means a communication in the form set out in Schedule 2B or in such other form as may be agreed from time to time which shall be sent by fax (or such other means as may be agreed from time to time) by the Counterparty and an Eligible Counterparty which is the Beneficiary of one or more Mortgage-Backed Promissory Notes to the Bank to direct the Bank to hold one or more of such Mortgage-Backed Promissory Notes for its own account in connection with a Eurosystem Credit Operation to be entered into by such Eligible Counterparty with another Participating NCB; Deed of Charge means a deed of charge in the form set out in Schedule 5 issued to the Bank by the Counterparty; Eligible Counterparty means a non-resident institution which is eligible to participate in a Eurosystem Credit Operation; Enforcement Date means the date on which the Bank declares the security created by the Deed of Charge to be enforceable in accordance with Clause 8.3; ESCB means the European System of Central Banks; 170

173 Eurosystem for the purposes of this Agreement is composed of the European Central Bank and the Participating NCBs; Eurosystem Credit Operation means a credit operation with a Participating NCB analogous to the operations described in clause 2.1(i) as described in the Report; euro means the single currency of participating member states of the European Union introduced on 1 January 1999; Events of Default means the events of default set out in Clause 8 and any one an Event of Default ; Finance Documents means each of this Agreement, the Deed of Charge, and the Mortgage-Backed Promissory Notes; Floating Charge means the floating charge created by the Deed of Charge over the assets therein specified; Further Advance means a discretionary further Loan made by the Counterparty to a Mortgage Borrower as an addition to and on the security of a Mortgage which is on the date of the making of such further Loan included in the Mortgage Pool and that is in accordance with the Selection Criteria; General Documentation means the document dated February 2011 issued by the European Central Bank entitled the Single Monetary Policy in Stage Three, general documentation on Eurosystem monetary policy instruments and procedures; Initial Mortgage Pool means the Loans and Mortgages securing such Loans which have been initially selected and segregated by the Counterparty and set out in the Initial Mortgage Schedule to be charged to the Bank pursuant to the Deed of Charge; Initial Mortgage Schedule means the schedule setting out the details of the Initial Mortgage Pool as specified in Schedule 4; Insurance Contracts means the insurance policies effected by the Mortgage Borrowers or of which the Mortgage Borrowers become beneficiaries from time to time in relation to any Loan in accordance with the terms of the Mortgage Conditions; Loan means an advance made by the Counterparty by way of loan and which is subject to the Mortgage Conditions and which is a loan identified in a Mortgage Schedule (and whether originally advanced as a Loan or as a Further Advance); Loan to Value Ratio means the ratio, expressed as a percentage, which after appropriate allowance has been made for accrued and estimated interest the aggregate of (i) the amount of the Balances of any Loan and (ii) the amount of the Balances of any Further Advances bears to the last professional valuation of the relevant Property and shall be calculated in the manner set out in schedule 4; Marginal Lending Facility means the standing facility of the Bank designated as such pursuant to which certain Counterparties of the Bank may receive overnight credit against a pre-specified interest rate; Maturity Date has the meaning given to it in clause 2.9;

174 Mortgage means the first legal mortgage or charge of freehold or long leasehold residential property (or, if the Bank so consents, a first equitable mortgage by deposit of title deeds), or a solicitor s undertaking to put in place a first legal mortgage or charge, which is security for any Loan; Mortgagee means in relation to a Loan and the related Mortgage the person from time to time entitled to exercise the rights of the mortgagee thereunder; Mortgage Borrower means in relation to each Mortgage the person who is the borrower thereunder; Mortgage Conditions means the terms and conditions contained in the Standard Documentation to which a Loan secured by a Mortgage is subject, including the terms of any letter of offer or agreement to make a loan to a Mortgage Borrower if, pursuant to such letter of offer or agreement, the Loan advance was secured by a Mortgage; Mortgage Pool means, on any date (i) (ii) the Loans and Mortgages securing such Loans comprising the Initial Mortgage Pool; any Loans and Mortgages securing such Loans which have been segregated on or before that date; other than in each case such of those Mortgages as shall then have been redeemed in the ordinary course of business of the Counterparty or shall have otherwise ceased pursuant to any of the provisions hereof to be a part of the Mortgage Pool; Mortgage Schedule means the Initial Mortgage Schedule and each schedule setting out details as specified in Schedule 4 of the Loans and Mortgages securing such Loans which have subsequently been segregated; Mortgage-Backed Promissory Notes means mortgage-backed promissory notes in the form set out in Schedule 1 or in such other form as may be agreed from time to time; Other Lending means any loan or other credit advanced to a Mortgage Borrower other than (i) (ii) a Loan or a Loan which is treated as a Further Advance; Participating NCBs means national central banks of the EU Member States which have adopted the single currency in accordance with the Treaty establishing the European Community; Property means, in relation to a Mortgage, the freehold or leasehold property upon which the Loan(s) of the Mortgage Borrower are secured and the expression the Properties shall be construed accordingly; Property Deeds means all conveyancing deeds and documents which make up the title to the Properties and the Mortgages, including land certificates and each letter of 172

175 offer in respect of a Mortgage and solicitors undertakings and all other documents comprised in the Related Security (as defined in the Deed of Charge) relating to each such Mortgage; segregated in relation to a Loan means that such Loan has been identified in the paper and/or computer based (as may be appropriate) records of the Counterparty in such a manner as will distinguish it from all other loans administered or beneficially owned by the Counterparty and in such a manner as will make it clear that such Loan and the Mortgage securing such Loan is part of the Mortgage Pool and segregate shall be constructed accordingly; Selection Criteria means the criteria set out in Schedule 3 for the selection of a Loan secured by a Mortgage for inclusion in the Mortgage Pool; Settlement Account means an account held by the Counterparty with the Bank for the purposes of processing payments in TARGET2-Ireland or where no such account has been opened, such an account in the name of another entity (a Third Party ) with the Bank as the Counterparty may nominate subject always to the agreement of the Bank and the relevant Third Party to its designation as such; Standard Documentation means standard mortgage documentation of the Counterparty (i) (ii) in such form as has been advised to the Bank prior to the date hereof, or in such other form as may be from time to time be advised by the Counterparty to the Bank; Subsidiary shall have the meaning in Section 155 of the Companies Act, 1963; Supplemental Agreement means a supplemental agreement to this Agreement in such form as the Bank may require which shall be made between the Counterparty, an Eligible Counterparty which is proposed to be the Beneficiary of one or more Mortgage-Backed Promissory Notes and the Bank and which shall provide for the relationship between the Eligible Counterparty and the Bank including without prejudice to the generality of the foregoing the limits on the Bank s obligations in respect of such Notes and an indemnity from the Eligible Counterparty in favour of the Bank in respect of such obligations. TARGET2-Ireland means the RTGS system of the that forms part of TARGET2; this Agreement means this Framework Agreement; Valuation Date means the date of this Agreement, and in the case of the next following Valuation Date, the date which is the last Business Day of the first calendar month following the date of this Agreement and, in the case of each subsequent Valuation Date, the date which is the last Business Day of each subsequent month, or such other date(s) as the Bank and the Counterparty may agree from time to time; Valuation Period means in the case of the first Valuation Period the period commencing on the date of this Agreement and ending on the next following Valuation

176 Date and in the case of each subsequent Valuation Period means the period commencing on the day following a Valuation Date and ending on the next following Valuation Date; Value shall have the meaning ascribed to it in Clause The headings and the contents page in this Agreement shall not affect its interpretation Clause and Schedule headings are for ease of reference only Words denoting the singular number only shall include the plural number also and vice versa. Words denoting one gender only shall include the other gender References to Clauses and Schedules shall, unless the context otherwise requires, be to clauses and schedules in this Agreement Reference to a company shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or established and reference to a person shall be construed so as to include any individual, firm, company, corporation, undertaking, government, state or agency of a state, or any association or partnership (whether or not having separate legal personality) Reference in this Agreement to any statute or statutory provision shall unless otherwise stated be to a statute or statutory provision of or applicable in Ireland and shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted or any statutory instrument, order or regulation made thereunder or under any such statutory amendment, modification or re-enactment. Reference to any European Union legislative provision shall be construed as encompassing, where relevant, reference to: (a) (b) (c) the same as it may have been, or may from time to time be, amended, replaced or consolidated; any legislative provision amending, replacing or consolidating such provision and/or; any legislative provision, order or regulation implementing such provision or made thereunder All certificates required to be provided pursuant to this Agreement shall be certificates signed by a duly authorised representative of the party required to provide such certificates Reference herein to any document, report, operating procedures or agreement shall include reference to such document, report, operating procedures or agreement as varied, supplemented, novated or replaced from time to time. 174

177 1.10. Reference to any party to this Agreement shall include its successors and assigns, if and to the extent that succession or assignment is contemplated or permitted herein. 2. Mortgage-Backed Promissory Notes 2.1. Subject to clauses 2.2 and 2.3 and where relevant 2.8(iii): (i) Each time (a) (b) (c) a bid by the Counterparty in a tender procedure (as described in Chapter 5 of the General Documentation ) is accepted, or the Counterparty avails of the credit line facility for intraday credit in TARGET2-Ireland, or the Counterparty wishes to make a drawing on an overnight basis under the Marginal Lending Facility, it may issue to the Bank a Mortgage-Backed Promissory Note of an appropriate nominal amount or aggregate nominal amounts in satisfaction of its obligation to transfer a sufficient amount of eligible assets to settle the amount of liquidity it has been allotted in such tender procedure or as the case may be its obligation to provide eligible assets in respect of such transaction or such drawing. The amount of such liquidity or the contractual amount of such reverse transaction or the amount of such drawing as the case may be is herein referred to as the Liquidity Provided Amount. The required nominal amount(s) corresponding to any Liquidity Provided Amount shall be determined in accordance with the applicable risk control procedures of the Bank for the time being for the tender procedure, reverse transaction or drawing in question. (ii) (iii) The Counterparty may enter into an agreement with an Eligible Counterparty whereby that Eligible Counterparty advances an amount or amounts ( the Liquidity Provided Amount ) to the Counterparty on foot of a Mortgage- Backed Promissory Note issued by the Counterparty to the Bank as nominee for and for the account and benefit of that Eligible Counterparty and to its order for such nominal amount or aggregate nominal amounts as the Counterparty and the Eligible Counterparty may agree. The Counterparty and an Eligible Counterparty which is the Beneficiary of one or more Mortgage-Backed Promissory Notes already in issue may where the relevant Eligible Counterparty is to enter into a Eurosystem Credit Operation with another Participating NCB instruct the Bank in the form of a Direction to hold for the account of such other Participating NCB the Mortgage-Backed Promissory Notes referred to above or any one or more of them of an appropriate nominal amount or aggregate nominal amounts in satisfaction of the obligation of the relevant Eligible Counterparty to transfer a sufficient amount of eligible assets to settle the amount of liquidity it has been allotted

178 or as the case may be its obligation to provide eligible assets in respect of the transaction or such drawing constituting the relevant Eurosystem Credit Operation. The amount of such liquidity or the contractual amount of such reverse transaction or the amount of such drawing as the case may be is herein referred to as the Liquidity Provided Amount. The required nominal amount(s) corresponding to any Liquidity Provided Amount shall be determined in accordance with the applicable risk control procedures of the other Participating NCB for the time being for the Eurosystem Credit Operation in question The aggregate nominal amount of all Mortgage-Backed Promissory Notes issued by the Counterparty which are outstanding at any one time shall not exceed such amount as may from time to time be notified by the Bank to the Counterparty Mortgage-Backed Promissory Notes may have a maturity of whatever period(s) may be necessary to allow the use of such Notes as collateral in longer-term ESCB refinancing operations The Mortgage-Backed Promissory Notes shall be denominated in euro The Mortgage-Backed Promissory Notes will be secured by a floating charge over the Mortgage Pool in the form of the Deed of Charge or in such other form as may be agreed from time to time Each Mortgage-Backed Promissory Note shall be in such amount and for such period as is specified in the relevant Authorisation, and shall have a maturity date which is a Business Day. If the Maturity Date in respect of any Mortgage-Backed Promissory Note is not a Business Day then the holder thereof will not be entitled to payment of the amount due until the next following Business Day, but will be entitled to interest at the rate referred to in clause 2.9 for the relevant Mortgage-Backed Promissory Note in respect of such postponement The Bank shall be supplied by the Counterparty with and shall maintain in safe keeping a stock of Mortgage-Backed Promissory Notes duly stamped and duly executed by the Counterparty but uncompleted by or on behalf of the Counterparty. Each Mortgage-Backed Promissory Note shall be held by the Bank in trust for the Counterparty until the Bank receives instructions from the Counterparty in the form of an Authorisation to complete same. A Mortgage-Backed Promissory Note will become effective upon completion by the Bank in accordance with the terms of the relevant Authorisation. The Counterparty hereby irrevocably authorises the Bank to complete and deliver each Mortgage-Backed Promissory Note in accordance with the relevant Authorisation, and upon such completion to hold it for the Bank s own account or as the case may be as nominee for and for the account and benefit of an Eligible Counterparty and to its order as referred to in and in accordance with the relevant Authorisation. 176

179 2.8. (i) Forthwith upon completion of a Mortgage-Backed Promissory Note for the Bank s own account, the Bank shall pay the Liquidity Provided Amount in respect of the Mortgage-Backed Promissory Note to the Counterparty by crediting its Settlement Account with the Bank. (ii) In any case referred to in clause 2.1(i) or (ii) in which another Participating NCB or an Eligible Counterparty is concerned the Bank shall make no payment but shall forthwith inform such Participating NCB or Eligible Counterparty of the issue of the Note to the Bank, and it shall be the responsibility of the Counterparty to arrange for payment of the Liquidity Provided Amount to be made to it by such Participating NCB or Eligible Counterparty. (iii) On receipt of a Direction under a Supplemental Agreement to which the Eligible Counterparty which joins in the Direction is a party the Bank shall make no payment but shall forthwith inform the Participating NCB named in the Direction that with effect from the date of the Direction, the Bank shall hold the Mortgage-Backed Promissory Note(s) to which the Direction applies for the account of such other Participating NCB and it shall be the responsibility of the Eligible Counterparty joining in that Direction to arrange for payment of the Liquidity Provided Amount to be made to it by such Participating NCB and for the avoidance of doubt it is acknowledged that upon such Direction taking effect the Bank shall no longer hold such Mortgage-Backed Promissory Note(s) as nominee for and for the account and benefit of that Eligible Counterparty and to its order (i) On the maturity date specified in a Mortgage-Backed Promissory Note ( the Maturity Date ) the Counterparty shall be obliged to pay to the Bank for its own account or as the case may be for the account of the Beneficiary of such Note at such date or to such Beneficiary the Liquidity Provided Amount corresponding to the Mortgage-Backed Promissory Note together with (a) (b) in the case of a Mortgage-Backed Promissory Note issued upon terms that it will bear interest a sum in respect of interest determined by reference to the following formula: or, B i C 360 in the case of a Mortgage-Backed Promissory Note issued at a discount upon terms that it would not bear interest a sum in respect of discount determined by reference to the following formula: M M i C Where:

180 B = C = i = the Liquidity Provided Amount corresponding to the Mortgage-Backed Promissory Note, tenor of the Mortgage-Backed Promissory Note in days, including the date of issue but excluding the Maturity Date, the fixed interest rate (expressed as a decimal) specified in the tender announcement (in the case of a fixed rate tender) or the interest rate bid by the Counterparty (in the case of a variable rate tender) or the interest rate quoted by the Bank in the case of a drawing under the Marginal Lending Facility (expressed as a percentage) or, as the case may be the interest rate determined pursuant to the Counterparty Agreement, and M= Maturity Amount stated in relevant Form of Authorisation. (ii) No interest shall be payable upon a Mortgage-Backed Promissory Note issued in respect of a non-monetary policy (intra-day) reverse transaction Each Mortgage-Backed Promissory Note will be redeemed by the Counterparty on the Maturity Date specified therein and provided that payment is made on that date or as the case may be on the date referred to in Clause 2.6 the amount referred to in clause 2.9 shall be accepted in redemption thereof. The Bank may require the Counterparty to redeem a Mortgage-Backed Promissory Note prior to its Maturity Date at the nominal amount thereof pursuant to Clause 8.3. Upon such repayment and redemption the Mortgage-Backed Promissory Note will be cancelled (i) If the Counterparty fails to redeem a Mortgage-Backed Promissory Note on the Maturity Date or as the case may be the date referred to in Clause 2.6 it shall pay interest on the nominal amount due thereon from the Maturity Date or as the case may be from the date referred to in Clause 2.6 up to the time of actual payment (as well after as before judgement) at the rate per annum which is 2.5% in excess of the higher of the European Overnight Index Average and the rate applicable to the Marginal Lending Facility. (ii) Interest under this clause 2.11 shall accrue daily on the basis of a year of 360 days from and including the Maturity Date or as the case may be the date referred to in Clause 2.6 to the earlier of: (a) (b) the date of payment; and the last day of each period of one year, and (where no payment has been made during that period of a year) shall be due and payable at the end of each such period. So long as the default continues, the rate referred to in clause 2.11(i) above shall be calculated on a similar basis at the end of each such period of a year, and interest payable under this clause 2.11 which is 178

181 unpaid at the end of each such period of a year shall thereafter itself bear interest at the rate provided in this clause Payments will be subject in all cases to any laws and regulations applicable thereto All amounts payable (whether in respect of principal, interest or otherwise) in respect of the Mortgage-Backed Promissory Notes shall be made by the Counterparty free and clear of any withholding at source or deduction at source for or on account of any present or future taxes, fees, duties, assessments or governmental charges of whatever nature unless the Counterparty is required by the laws or other legal provisions of the European Union or Ireland to make such a payment subject to such deduction or withholding. In the event of any such deduction or withholding the sum payable by the Counterparty in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that after the making of such deduction or withholding the Bank or as the case may be another Participating NCB or Eligible Counterparty receives and retains (free from any liability in respect of such deduction or withholding) a net sum equal to the amount which it would have received and so retained if no such deduction or withholding had been made. 3. Administration 3.1. The Counterparty hereby covenants with the Bank that it shall, at all times during the term of this Agreement, administer the Mortgages and all Related Security and Insurance Contracts and all related matters (including, without limitation, the procedures for the redemption thereof by Mortgage Borrowers) in the same manner as it administers all other mortgages (in respect of which it is the mortgagee and beneficial owner) and matters in relation thereto During the continuance of the security created by the Deed of Charge and prior to the Enforcement Date the Counterparty shall have full power, authority and right to do or cause to be done any and all things which the Counterparty may deem necessary, convenient, or incidental, to the Mortgages and all Related Security and Insurance Contracts and all related matters (including, without limitation, the procedures for redemption thereof by Mortgage Borrowers) and/or the management of the Properties charged pursuant to Mortgages and the protection of the interests of the Counterparty and of the Bank as charge in respect thereof. 4. Information 4.1. The Counterparty hereby covenants with the Bank that it shall maintain records in a computer readable form or otherwise of all information in relation to each Loan secured by a Mortgage which forms part of the Mortgage Pool necessary to administer and/or enforce each such Loan and Mortgage and shall ensure that on any day each such Loan secured by a Mortgage which forms part of the Mortgage Pool on that date is segregated.

182 4.2. The Counterparty shall furnish to the Bank in such format(s) or media as the Bank may from time to time require in respect of all Mortgages comprised in the Mortgage Pool a schedule providing the information in respect thereof as set out in Schedule 4, on the date of execution of the Deed of Charge and on each Valuation Date and on any other date on which the Bank may so request. Such Schedule shall be amended to reflect any additions thereto or releases therefrom made pursuant to clauses 5.3, 5.4 or 6.1 or otherwise. If so requested by the Bank the Counterparty may furnish, in lieu of such Schedule on each such date, a Schedule showing only the variations thereto that have been made or arisen since the previous such Schedule was delivered Subject to clause 4.4, the Counterparty shall permit the Bank at any time upon reasonable notice (i) (ii) to have access to all books of record, accounts and other relevant records relating to the administration of the Mortgage Pool and related matters in accordance with the provisions of this Agreement, and to inspect the Counterparty s records and computer system and the manner in which Mortgages are segregated and the Property Deeds in respect thereof are held, and shall furnish the Bank with such reports upon such records and shall permit the Bank to carry out such audit procedures in respect of such matters as the Bank may in each case from time to time reasonably require Nothing herein or in the Deed of Charge shall oblige the Counterparty to disclose to the Bank or any other Noteholder (as defined in the Deed of Charge) or to allow the Bank or any such other Noteholder access to prior to the Enforcement Date any information in relation to a Mortgage Borrower or any other person which would be contrary to the duty of confidentiality owed by the Counterparty to such Mortgage Borrower or which constitutes personal data for the purposes of the Data Protection Act, Valuation of Mortgage Pool 5.1. The Counterparty hereby undertakes to the Bank that on the date hereof the Value of the Mortgage Pool is not less than the Agreed Value, and that on each subsequent Valuation Date (but not necessarily on any other date) by reference to a Mortgage Schedule as at that date it shall not be less than the Agreed Value For the purposes of clause 5.1 the Value of the Mortgage Pool shall mean the aggregate of (i) the Balances on all Loans secured by Mortgages comprised in the Mortgage Pool on the relevant Valuation Date (which for the avoidance of doubt shall 180

183 not include any Loans secured by Mortgages repaid or prepaid in full on or prior to such Valuation Date or which cease to be part of the Mortgage Pool whether pursuant to clause 6.2 or otherwise); (ii) (iii) all Further Advances made during the Valuation Period ending on the relevant Valuation Date; and all interest accrued on the Loans secured by Mortgages comprised in the Mortgage Pool but which remains unpaid on the relevant Valuation Date; and with the deduction of (iv) (v) all repayments and prepayments of principal in respect of the Loans which the Counterparty estimates it will receive during the next following Valuation Period; and all payments of interest which the Counterparty estimates it will receive during the next following Valuation Period If the Value of the Mortgage Pool shall on any Valuation Date be less than the Agreed Value, the Counterparty shall forthwith segregate such further Loans as will ensure compliance with its obligations under Clause 5.1 and the Mortgages securing such further Loans shall form part of the Mortgage Pool If the Value of the Mortgage Pool shall on any Valuation Date exceed the Agreed Value, Loans may be selected by the Counterparty having a value equal to or less than such excess amount and the Loans and the Mortgages securing such Loans shall cease to be part of the Mortgage Pool and cease to be segregated During the subsistence of the security constituted by the Deed of Charge, otherwise than with the prior written consent of the Bank, the Counterparty shall (i) (ii) not create or attempt to create or permit to arise or subsist any Encumbrance (as defined therein) on or over the Charged Property or any part thereof; or not, otherwise than in the ordinary course of business, sell, transfer, lend or otherwise dispose of the Charged Property or any part thereof or redeem, agree to redeem or accept repayment in whole or in part of any Loan or attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one time or over a period of time. 6. Warranties and Representations 6.1. The Counterparty represents, warrants and undertakes to the Bank that, on the date hereof and on each subsequent Valuation Date, all Loans secured by Mortgages forming part of the Mortgage Pool comply or as the case may be shall comply with the Selection Criteria. If and to the extent that any Loan fails to comply with the Selection Criteria the Counterparty shall remove such Loan and the Mortgage securing such Loan from the Mortgage Pool and replace it with a Loan and a

184 Mortgage securing such Loan which does comply with the Selection Criteria, such substitution being effected in conformity with Clause In the event of a material breach of the Selection Criteria in respect of any Loan during a Valuation Period the Bank shall be entitled to require such Loan to be replaced forthwith by the Counterparty The Counterparty further warrants and represents to the Bank that on the date hereof: (i) (ii) it is a body corporate duly organised under the laws of Ireland with power to enter into each of the Finance Documents and to exercise its rights and perform its obligations hereunder and thereunder; it has duly taken all corporate and other action and received the consent of any third party that in either case is required (a) (b) to authorise its execution of each such Finance Document and the performance of its obligations thereunder and to ensure the validity and enforceability in accordance with their respective terms of each such Finance Document (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances, the time barring of claims, and the rule that obligations to bear the stamp duty liabilities of others may be void); (iii) (iv) (v) in any proceedings taken in relation to any of the Finance Documents, it will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process; the obligations expressed to be assumed by it in each of the Finance Documents are legal and valid obligations binding on it in accordance with the terms hereof and thereof (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances, the time barring of claims, and the rule that obligations to bear the stamp duty liabilities of others may be void); it has not taken any corporate action nor have any other steps been taken nor legal proceedings been started or threatened against it for its winding-up, dissolution or re-organisation or for the appointment of a receiver, an examiner, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues. 7. Property Deeds 182

185 7.1. The Property Deeds relating to the Mortgage Pool shall be identifiable and distinguishable from the title deeds, life policies and insurance contracts and other documents in relation to other properties and mortgages which are held by or on behalf of or administered by the Counterparty and shall be kept, held and/or dealt with in the same manner as the Counterparty keeps, holds and deals with the property deeds and insurance contracts relating to mortgage loans advanced by it which are not at the relevant time comprised in the Mortgage Pool. However for the avoidance of doubt it is hereby confirmed that there is no requirement for such Property Deeds to be physically segregated On or after the Enforcement Date the Counterparty shall deliver the Property Deeds and Insurance Contracts relating to the Mortgage Pool to, or to the order of, the Bank on the written request of the Bank. 8. Events of Default 8.1. For the purposes of this Agreement an Event of Default shall be treated as occurring at the time specified in clause 8.2 if: (a) (b) (c) (d) (e) any representation or warranty made or deemed to be made or repeated by the Counterparty under this Agreement or in the Deed of Charge was or is incorrect in any material respect when made or deemed to be made or repeated; or the Counterparty defaults in the due and punctual performance of any of the other provisions of this Agreement including payment of any Mortgage-Backed Promissory Note on its Maturity Date and (if, in the Bank s determination, capable of remedy) fails to remedy such default within such period as the Bank may designate (not to exceed 30 days) after notice is given by the Bank requiring such default to be remedied and designating the time period for remedy thereof; or the Counterparty ceases or threatens to cease or carry on its business or any substantial part thereof; or a decision is made by a competent judicial or other authority to implement in relation to the Counterparty or any of its Subsidiaries a procedure for the winding-up of, or the appointment of a liquidator or analogous officer over, the Counterparty or any such Subsidiary, as the case may be, or any other analogous procedure; or a decision is made by a competent judicial or other authority to implement a reorganisation measure or other analogous procedure intended to safeguard or restore the financial situation of, and to avoid the making of a decision of the kind referred to in (d) above in relation to, the Counterparty or any of its Subsidiaries; or

186 (f) (g) (h) (i) (j) (k) (l) a petition is presented for the appointment of an examiner pursuant to section 2 of the Companies (Amendment) Act, 1990 in relation to the Counterparty or any of its Subsidiaries or an examiner is appointed to the Counterparty or any of its Subsidiaries; or a petition (not being a petition falling within (f) above or a procedural step falling within (j) below) is filed or presented in respect of the Counterparty or any of its Subsidiaries (other than by the Bank in respect of any obligation under this Agreement) in any court or before any agency alleging or for the bankruptcy, winding-up or other insolvency of the Counterparty or any of its Subsidiaries (or any analogous proceeding) or seeking any reorganisation, arrangement, composition, re-adjustment, liquidation, dissolution or similar relief (other than a solvent reconstruction, amalgamation or reorganisation to which the Bank has given its prior written consent) under any present or future statute, law or regulation, such petition not having been stayed or dismissed within 30 days of its filing; or there is appointed a receiver, trustee or analogous officer to the Counterparty or any of its Subsidiaries or over all or any material part of the property of the Counterparty or any of its Subsidiaries, unless the Bank has given its prior written confirmation that the Bank will not serve notice of the occurrence of an Event of Default on the basis of such appointment; or a declaration is made by the Counterparty or any of its Subsidiaries in writing of its inability to pay all or any of its debts or to meet its obligations, or a voluntary general agreement or arrangement is entered into by the Counterparty or any of its Subsidiaries with its creditors, or the Counterparty or any of the Subsidiaries is, or is deemed to be, insolvent or is deemed to be unable to pay its debts; or procedural steps preliminary to any matter referred to in (d), (e), (f) or (h) above are taken; or the Counterparty or any of its Subsidiaries has an authorisation to conduct activities under Directive No. 2006/48/EC of the European Parliament and the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions, Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field or Directive No. 2004/39/EC of the European Parliament and the Council of 21 April 2004 on markets in financial instruments, suspended or revoked; or the Counterparty or any of its Subsidiaries is suspended or expelled from membership of any payment system or arrangement through which payments under monetary policy transactions are made or is suspended or expelled from membership of any securities settlement system used for the settlement of 184

187 Eurosystem monetary policy operations or any other securities exchange or association or other self-regulatory organisation concerned with dealing in securities, or suspended or prohibited from dealing in securities by any government agency; or (m) (n) (o) (p) (q) (r) (s) (t) measures such as are referred to in Section 5 of Title III of Directive No. 2006/48/EC of the European Parliament and the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions are taken against the Counterparty or any of its Subsidiaries; or an event of default occurs in relation to the Counterparty or any of its Subsidiaries, including any branch of that Counterparty or any such Subsidiary, as the case may be, in any agreement, arrangement or transaction entered into by it including any branch of it with any other member of the Eurosystem for the purpose of effecting monetary policy operations where any other member has exercised its right to close out under any such agreement, arrangement or transaction; or any event analogous to any of the events at (d) to (j), inclusive, above occurs in any jurisdiction in relation to the Counterparty or any of its Subsidiaries; or the Counterparty ceases to be entitled to operate, or ceases to operate, the Settlement Account or, where the Settlement Account is opened in the name of a Third Party, such Third Party ceases to be so entitled or to so operate or withdraws its consent to the designation thereof as the Settlement Account for the purposes of this Agreement; or the Counterparty fails to provide to the Bank any information relevant to the Eurosystem s monetary policy operations, which failure causes severe consequences for the Bank; or In any case where an Eligible Counterparty has issued a Direction in respect of one or more Mortgage-Backed Promissory Note(s) pursuant to clause 2.1(iii), any of the events falling within sub-paragraphs (a) - (o) of this clause 8.1 occurs where references in those sub-paragraphs to the Counterparty shall be read mutatis mutandis as references to the Eligible Counterparty joining in that Direction and references to this Agreement shall be read mutatis mutandis as references to the Supplemental Agreement to which that Eligible Counterparty is a party, or the Counterparty becomes subject to the freezing of funds and/or other measures imposed by the European Union restricting the Counterparty s ability to use its funds; or the Counterparty becomes subject to the freezing of funds and/or other measures imposed by a Member State under Article 75 of the Treaty on the Functioning of the European Union restricting the Counterparty s ability to use its funds; or

188 (u) (v) (w) (x) all or a substantial part of the Counterparty s assets are subject to a freezing order, attachment, seizure or any other procedure that is intended to protect the public interest or the rights of the Counterparty s creditors; or all or a substantial part of the Counterparty s assets are assigned to another entity; or any other impending or existing event the occurrences of which may threaten the performance by the Counterparty of its obligations under the arrangement it entered into for the purpose of effecting monetary policy operations or any other rules applying to the relationship between the Counterparty and any of the central banks of the Eurosystem; or an event of default (not materially different from any event of default falling within sub-clauses (a) to (w) of this clause 8.1 above) occurs in relation to the Counterparty or any of its Subsidiaries under any agreement concluded with any other member of the Eurosystem entered into for the purposes of the management of the foreign reserves or own funds of any such member of the Eurosystem, and, except in the case of an event which arises in relation to the Counterparty and falls within sub-paragraphs (d) or (o) or (s) (in the case of (o), to the extent that it relates to sub-paragraph (d)), of clause 8.1 above, the Bank serves written notice on the Counterparty stating that such event shall be treated as an Event of Default for the purposes of this Agreement An Event of Default is to be treated as occurring: (a) (b) In the case of an event which arises in relation to the Counterparty and falls within sub-paragraphs (d) or (o) (in the case of (o), to the extent that it relates to sub-paragraph (d)) of clause 8.1, at the time when the relevant event occurs; In any other case, at the time designated by the Bank for such purpose in a notice: (i) served by the Bank in accordance with Clause 10 on the Counterparty; (ii) served not more than three Business Days before the time so designated; and (iii) stating that the relevant event is to be treated as an Event of Default for the purposes of this Agreement If the Counterparty fails to remedy, or procure the remedy by an Eligible Counterparty as aforesaid, of an Event of Default within the period (if any) permitted by the Bank then the Bank may require the Counterparty to redeem in case of an 186

189 Event of Default under Clause 8.1(s) only the Mortgage-Backed Promissory Notes subject to the relevant Direction, and in all other cases to redeem all Mortgage- Backed Promissory Notes then in issue, at the nominal amount thereof and if the Counterparty shall fail to do so forthwith the Bank may declare the security created by the Deed of Charge to be enforceable. 9. No Partnership 9.1. It is hereby acknowledged and agreed by the parties that nothing in this Agreement shall be construed as giving rise to any partnership between the parties. 10. Notices Any notices to be given pursuant to this Agreement to any of the parties shall be sufficiently served if delivered by hand or sent by post or by facsimile transmission and shall be deemed to be given (in the case of delivery by hand) when delivered or (in the case of post) at the expiration of two Business Days after despatch or (in the case of facsimile transmission) when despatched and shall be sent: (a) (b) in the case of the Counterparty, to the address appearing at the beginning of this Agreement (facsimile number: ; Attn: the Secretary); in the case of the Bank, to the address appearing at the beginning of this Agreement (facsimile number: ; Attn: the Head of Payments and Securities Settlements); or to such other address or facsimile number as may from time to time be notified by either party to the other by written notice in accordance with the provisions of this clause. 11. Entire Agreement and Variation The Finance Documents set out the entire agreement and understanding between the parties in respect of the issue of Mortgage-Backed Promissory Notes, the creation of security over, and the administration of, the Mortgages and the collateral security No variation of this Agreement shall be effective unless it is in writing and signed by (or by some person duly authorised by) each of the parties The Bank shall, upon receipt of a request to that effect from the Counterparty made in accordance with such procedures and at such intervals as may from time to time be agreed between the Bank and Counterparty, confirm (if such is the case) in writing to the Counterparty or such person(s) as the Counterparty may specify that the floating charge constituted by the Deed of Charge has not crystallised. 12. Waiver and Severability

190 12.1. Exercise or failure to exercise any right under this Agreement shall not, unless otherwise provided herein, constitute a waiver of that or any other right If any of the provisions hereof should be or become invalid in whole or in part, the other provisions shall remain in force. The invalid provisions shall, according to the intent and purpose of the Agreement, be replaced by such valid provision which in its economic effect comes as close as legally possible to that of the invalid provision. The same shall apply with respect to involuntary gaps herein. 13. Assignment The Bank may transfer and assign its rights or obligations under this Agreement and in any or all Mortgage-Backed Promissory Notes (any such Notes being transferred only by endorsement and delivery) and the Deed of Charge to any body corporate as the Bank may from time to time approve in writing, and upon such terms and conditions, as it may think fit. The Counterparty may not transfer and assign its rights and obligations hereunder without the prior written consent of the Bank. 14. Termination This Agreement may at any time be terminated by either party by giving to the other not less than 30 days prior notice in writing (such termination becoming effective upon expiry of such notice), provided that such termination shall not affect any Mortgage-Backed Promissory Note which is then outstanding, and the provisions of this Agreement shall continue to apply to each Mortgage-Backed Promissory Note until redeemed by the Counterparty On the termination of this Agreement the Bank shall release the security created by the Deed of Charge. 15. Legal Opinion On the date of this Agreement the Counterparty shall procure the delivery to the Bank of an opinion from legal advisers acceptable to the Bank, to the effect set out in Schedule 6, and containing such other provisions as the Bank may require. 16. Governing Law This Agreement and the Mortgage-Backed Promissory Notes shall be governed by and construed in accordance with the laws of Ireland and the parties hereto irrevocably submit to the jurisdiction of the courts of Ireland. 188

191 Form of Mortgage-Backed Promissory Note Issued in Dublin [Date] FOR VALUE RECEIVED, the undersigned, [name and address of Counterparty] (the Counterparty ) hereby promises to pay to the of P.O. Box 559, Dame Street, Dublin 2 or order the following amount and interest thereon (if applicable) on the following date namely:- Nominal amount:- (security) Interest Rate:- Maturity Date:- This Mortgage-Backed Promissory Note is issued pursuant to and is governed by the terms of the Framework Agreement dated (as from time to time amended) entered into between the Counterparty and the, including without limitation the provisions of clause 13 thereof, as set out below. NOTE: Liquidity Provided Amount: Maturity Amount: IN WITNESS whereof the Counterparty has duly executed this Note the day and year above stated. Authorised Officer(s) of [Counterparty] Completed in accordance with Form of Authorisation on date above stated Authorised Officer(s)

192 Clause 13 Assignment The Bank may transfer and assign its rights or obligations under this Agreement and in any or all Mortgage-Backed Promissory Notes (any such Notes being transferred only by endorsement and delivery) and the Deed of Charge to any body corporate as the Bank may from time to time approve in writing, and upon such terms and conditions, as it may think fit. The Counterparty may not transfer and assign its rights and obligations hereunder without the prior written consent of the Bank. 190

193 Schedule 2a Form of Authorisation Authorisation to complete Promissory Note. Given pursuant to clause 2.7 of the Framework Agreement dated [ ]. Details authorised to be inserted. Start Date: Nominal amount of the Promissory Note: Liquidity Provided Amount: Maturity Amount if Note issued at a discount: * Will Note be issued with interest payable/at a discount (delete one) Interest Rate:** Maturity Date: Name and address of any relevant other Participating NCB/relevant Eligible Counterparty: Date: Authorised Signature(s): * The Bank is to be consulted and its agreement obtained if the Counterparty proposes to issue Notes at a discount. ** Implied, if Note is issued at a discount.

194 SCHEDULE 2B Form of Direction Direction in respect of Eurosystem Credit Operation with other Participating NCB. Given pursuant to clause 2.1(iii) of the Framework Agreement dated [ ]. Nominal Amount of the Promissory Note: Issue Date: Liquidity Provided Amount: Relevant Participating NCB: Date: Authorised Signature(s) of Counterparty: Authorised Signature(s) of Eligible Counterparty: 192

195 Schedule 3 Selection Criteria for inclusion of a Loan secured by a Mortgage in Mortgage Pool 1. Such Loan shall be secured by a first legal mortgage or charge (or, if the Bank so consents, an equitable mortgage, by deposit of title deeds) or a solicitor s undertaking to put in place a first legal mortgage or charge, over a freehold or long leasehold residential property in Ireland the title to which is in conformity with the guidelines for the time being issued by the Law Society of Ireland to be followed by solicitors when completing certificates of title for residential mortgage lenders. 2. The Loan to Value Ratio shall be no more than 80%, by reference to the last valuation of the Property. 3. The consent of each Mortgage Borrower to permit a transfer of or creation of a charge over the Mortgage shall be contained in the Standard Documentation or shall have otherwise been given in writing. 4. No arrears of principal or interest on the Loan shall be outstanding for more than 65 days. 5. Such Loan (unless it is a Further Advance) shall have been advanced not less than 90 days prior to the segregation of the Mortgage for inclusion in the Mortgage Pool. 6. Such Loan shall be in annuity form, not endowment form, and the Mortgage shall be in all material respects in the form of the Standard Documentation. 7. The Mortgage shall not be subject to any Encumbrance (as defined in the Deed of Charge). 8. Such Loan shall not have a residual maturity greater than 40 years. 9. Such Loan shall not have a fixed period to the next interest reset date greater than 5 years. 10. The income of the borrower has been verified prior to the granting of such Loan. 11. The Counterparty shall not, as a matter of policy, include any loan granted to a borrower against which (i) proceedings to obtain payment have been commenced or (ii) an adverse court judgment has been issued during the three year period immediately preceding the granting of the Loan. In the event that such loan is identified as having been included in the relevant Mortgage Pool, the relevant loan shall be removed from such Mortgage Pool by the next Valuation Date. Note: Residential property for the purpose of this schedule does not include any commercial or non-residential property or any property (intended to be developed as residential property) which is not yet under development.

196 Schedule 4 Information required in respect of each Mortgage 1. Mortgage Borrower - [refer to System ID Number but not the name and address of the Mortgage Borrower]. 2. Drawdown date. 3. Maturity Date. 4. [Date and Amount of] Latest Professional Valuation [of the Property, without description of the Property]. 5. Original Amount of each Loan. 6. Current Balance including Accrued Interest for each Loan. 7. Estimate for next 30 days interest and repayments. 8. Balance for Valuation [= (6) minus (7)]. 9. Loan to Value Ratio [=(8) divided by (4)]. 10. Geographic location. 194

197 Schedule 5 Form of Deed of Charge DEED OF FLOATING CHARGE THIS DEED OF CHARGE is made on [DATE] BETWEEN: (1) [COUNTERPARTY] having its registered [or principal] office at [ADDRESS] ( the Counterparty ), and (2) CENTRAL BANK OF IRELAND of PO Box 559, Dame Street, Dublin 2 ( the Bank ). WHEREAS it is proposed that the Counterparty would borrow certain amounts on the security of this Deed of Charge which is issued to the Bank as trustee for Noteholders. NOW THIS DEED OF CHARGE WITNESSES AND IT IS HEREBY AGREED AND DECLARED as follows: 1. Definitions and Interpretation 1.1. In this Deed terms defined in the Framework Agreement (as defined herein) shall have the same meanings, and the following expressions shall have the following meanings: Charged Property means the property, assets and rights of the Counterparty for the time being comprised in or subject to the charges contained in clause 3 of this Deed of Charge, and references to the Charged Property include references to any part of it; Conveyancing Act means the Land and Conveyancing Law Reform Act 2009; Deed of Postponement or Deed of Confirmation means any agreement, deed or letter of consent and postponement given in connection with a Mortgage whereby any mortgagee of the property who is not a party to the relevant Mortgage, has agreed to postpone his interest (if any) in the relevant Property so that it ranks after that of the Counterparty; Drawdown Date means the date on which any Mortgage-Backed Promissory Note is issued by the Counterparty; Encumbrance means any mortgage, sub-mortgage, charge (whether legal or equitable), sub-charge (whether legal or equitable), pledge, lien, encumbrance, hypothecation, assignment by way of security, right of set-off or other security interest of any kind whatsoever or any agreement, trust or arrangement having the effect (economic or otherwise) of providing any security interest;

198 Enforcement Date means the date on which, following the occurrence of an Event of Default, the Bank declares the security hereby created to be enforceable pursuant to clause 8.3 of the Framework Agreement; Framework Agreement means the framework agreement dated today made between the Bank and the Counterparty for the purpose of regulating the issue of Mortgage-Backed Promissory Notes in respect of which the amounts outstanding thereunder are intended to be secured hereunder, and related matters, and shall include any documents which amend or are supplemental to such agreement; Initial Mortgage Pool means the Loans and Mortgages securing such Loans which have been initially selected and segregated by the Counterparty and set out in the Initial Mortgage Schedule to be charged to the Bank pursuant to the Deed of Charge; Initial Mortgage Schedule means the schedule supplied by the Counterparty to the Bank setting out the details specified in Schedule 4 to the Framework Agreement of the Initial Mortgage Pool; Insurance Company means the provider of any Insurance Contract; Insurance Contract means the insurance policies effected by the Mortgage Borrowers from time to time in relation to any Loan in accordance with the Mortgage Conditions; Mortgage means the first legal mortgage or charge of freehold or long leasehold residential property (or, if the Bank so consents, a first equitable mortgage by deposit of title deeds), or a solicitor s undertaking to put in place a first legal mortgage or charge, which is security for any Loan; Mortgage-Backed Promissory Notes means mortgage-backed promissory notes, being instruments acknowledging indebtedness of the Counterparty, substantially in the form set out in Schedule 1 to the Framework Agreement or in such other form as may be agreed from time to time; Noteholders means the Bank and any body corporate which the Bank may approve from time to time to which any Mortgage-Backed Promissory Note has been transferred; Property means in relation to a Mortgage the freehold property or leasehold property upon which the Loan(s) of the Mortgage Borrower are secured, and the expression the Properties shall be construed accordingly; Receiver means a receiver appointed under this Deed of Charge or pursuant to statutory powers by the Bank upon the security constituted hereunder becoming enforceable and includes more than one such receiver and any substituted receiver; Related Security in relation to a Loan means (i) any guarantee of the obligations of the Mortgage Borrower specified in the Mortgage Conditions for such Loan and (ii) any other document in existence from time to time which is referred to in the Mortgage Conditions as being security for the Loan but not Other Lending together with all right, 196

199 title, benefit and interest ancillary or supplemental to, and all powers and remedies for enforcing, the above; Secured Obligations means all present and future liabilities whatsoever of the Counterparty to any Noteholder represented by a Mortgage-Backed Promissory Note issued in accordance with the terms of the Framework Agreement which become due, owing or payable by the Counterparty to the Bank under or in respect of, and subject to the terms and conditions of, this Deed of Charge. Taxation includes any tax, levy, impost, duty, deduction or withholding of any nature which the Counterparty is obliged to pay or account for to the Revenue Commissioners or any other agency or instrumentality of government in Ireland Clause and Schedule headings are for ease of reference only In this Deed (i) (ii) words denoting the singular number only shall include the plural number also and vice versa; and words denoting one gender only shall include the other gender The words hereof, hereunder and similar words shall be construed as references to this Deed as a whole and not limited to the particular Clause, sub-clause, paragraph or provision in which the relevant reference appears References to a company shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or established Reference to any statute or statutory provision shall unless otherwise stated be to a statute or statutory provision of or applicable in Ireland and shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted or any statutory instrument, order or regulation made thereunder or under any such statutory amendment, modification or re-enactment Section 75 of the Conveyancing Act shall not apply to this Deed. 2. Covenant to Pay 2.1. The Counterparty covenants with the Bank that it will duly and punctually pay and discharge the Secured Obligations in accordance with their terms. 3. Security Mortgages, their Related Security and the Insurance Contracts 3.1. The Counterparty, as legal and beneficial owner and subject in each case to Clause 4, as a continuing security for the discharge and payment of the Secured Obligations, hereby:

200 (a) (b) (c) (d) charges by way of first floating charge to the Bank all its right, title, interest and benefit, present and future, in and to each of the Mortgages and the related Loans forming part of the Mortgage Pool, from time to time and the Counterparty s interest in the Properties intended to constitute the security for such Loans and the benefit of all covenants relating thereto and any rights or remedies of the Counterparty for enforcing the same, including, without limitation, the benefit of all Related Security for each Loan; charges by way of first floating charge to the Bank all its right, title, interest and benefit, present and future, in the Insurance Contracts, the sums thereby insured and all bonuses and other moneys payable or to become payable under the same together with the full benefit thereof and all powers and provisions contained in or conferred by the same; charges by way of first floating charge to the Bank all causes and rights of action, present or future, (and the net proceeds thereof) of the Counterparty against any person in connection with any report, valuation, opinion, certificate, undertaking, consent or other statement of fact or opinion given in connection with any Mortgage forming part of the Mortgage Pool or affecting the Counterparty s decision to enter into any such Mortgage; and charges by way of first floating charge to the Bank the benefit of any Deed of Postponement or Deed of Confirmation in relation to any Mortgage forming part of the Mortgage Pool. Crystallisation of Floating Charge 3.2. If an Event of Default occurs the floating charge created pursuant to this clause 3.1 ( the Floating Charge ) shall be converted into a fixed charge upon the service by the Bank of a notice to that effect upon the Counterparty. No Transfer of Obligations to the Bank 3.3. Notwithstanding anything else in this Deed the Bank does not assume, nor shall the Bank be obliged to perform, any of the Secured Obligations whatsoever (including, for the avoidance of doubt, the making of Further Advances to Mortgage Borrowers) and nothing herein shall be construed so as to transfer any of such obligations whatsoever to the Bank. Further Advances 3.4. Notwithstanding the provisions of Clause 3.1, the Bank hereby acknowledges that the Counterparty may from time to time effect Further Advances in respect of Mortgages. Restriction on Notice and Registration 198

201 3.5. The Bank undertakes to the Counterparty that prior to Enforcement Date it will not and it will not require the Counterparty to: (a) (b) give or cause to be given any notice of charge or sub-charge of any Mortgage forming part of the Mortgage Pool or its Related Security whether to the relevant Mortgage Borrower, any guarantor, any insurance company or any other person; or take any steps (i) (ii) (iii) to apply to register the Bank at the Land Registry as proprietor of any Mortgage forming part of the Mortgage Pool having registered title or effect any registration at the Land Registry or Registry of Deeds in respect of this Deed; to complete an assignment by way of security of any Mortgage or its Related Security; or to apply to effect registration at the Registry of Deeds in respect of any Mortgage having unregistered title or to effect any other registration at the Land Registry or Registry of Deeds in respect of such Mortgage or its Related Security. 4. Release on Redemption 4.1. Upon the Bank being satisfied that there has been a full and final payment and discharge by the Counterparty of the Secured Obligations, the Bank at the request and cost of the Counterparty shall release or discharge the Charged Property to the Counterparty or any other person entitled thereto. 5. Negative Pledge 5.1. During the subsistence of the security constituted by this Deed of Charge, otherwise than with the prior written consent of the Bank, the Counterparty shall (i) (ii) not create or attempt to create or permit to arise or subsist any Encumbrance on or over the Charged Property or any part thereof; or not, otherwise than in the ordinary course of business, sell, transfer, lend or otherwise dispose of the Charged Property or any part thereof or redeem, agree to redeem or accept repayment in whole or in part of any Loan or attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one time or over a period of time None of the foregoing prohibitions in this clause shall be construed as limiting any powers exercisable by any Receiver appointed by the Bank under or pursuant to this Deed of Charge.

202 6. Upon Enforcement 6.1. All moneys received or recovered by the Bank in respect of the Secured Obligations (including moneys received pursuant to clause 12.10) on or after the Enforcement Date shall be held by the Bank, and all moneys received by the Counterparty in respect of the Charged Property (other than moneys received pursuant to this Clause 6.1) on or after the Enforcement Date shall forthwith be paid to (and, pending such payment, the Counterparty shall hold such moneys on trust for) the Bank and shall be paid in accordance with the following order of priority: (a) (b) (c) first, in or towards satisfaction, pro rata according to their respective terms, of all amounts due and payable to the Bank and the Receiver in respect of their fees, costs and expenses as referred to in clause 9 hereof; second, to the Bank for the account of the Noteholders in respect of all amounts due and payable as Secured Obligations; and third, the surplus (if any) to the Counterparty The provisions of clauses 6.1 and shall take effect as and by way of variation from the provisions of sections 106(3), 107 and 109 of the Conveyancing Act, which provisions as so varied and extended shall be deemed incorporated herein, and as regards section 109 as if they related to a receiver of the Charged Property and not merely a receiver of the income thereof. 7. Continuance of Security 7.1. Without prejudice to the generality of Clause 2, this Deed shall remain in force as a continuing security to the Bank notwithstanding any settlement of account or any other act, event or matter whatsoever, except only the execution by the Bank on behalf of the Noteholders under seal of an absolute and unconditional release or the execution by or on behalf of the Bank of a receipt for all (and not part only) of the Secured Obligations. 8. Warranties and Covenants by the Counterparty General 8.1. The Counterparty warrants to the Bank on each Drawdown Date that it has taken all necessary steps to enable it to charge as security the Charged Property in accordance with Clause 3, and that it has taken no action or steps to prejudice the Bank s right, title and interest in and to the Charged Property The Counterparty covenants with the Bank that: 200

203 (a) (b) (c) (d) (e) (f) it shall not take any steps as a result of which the validity or effectiveness or enforceability of this Deed of Charge or the priority of the security created hereby shall be amended, terminated, postponed or discharged; it shall ensure if it is a company to which Section 99 or 111 of the Companies Act 1963 applies that particulars of this Deed of Charge will be registered in accordance with such section within 21 days of the date hereof and that if it is not such a company but is subject to a corresponding obligation under any other law and/or under its internal constitutional documents such corresponding particulars will be duly registered in accordance with the provisions of such law and/or such documents; it shall ensure that the manner of disclosure of the Deed of Charge, and of the negative pledge covenant contained herein, in its annual financial statements shall be in such form as the Bank may reasonably require; it shall pay within 30 days of the date hereof any and all stamp duty payable in connection with execution and delivery hereof; it shall furnish to the Bank forthwith upon request to that effect from the Bank made upon or after the Enforcement Date in accordance with clause 3.2 and upon request to that effect from the Bank notices to the Insurance Companies of the Bank s interest in respect of the Insurance Contracts and shall use its reasonable endeavours to obtain or procure return of acknowledgements to such notices if and when they are issued by the Bank; it shall pay all amounts it is liable to pay in respect of Taxation and local rates upon the due dates for payment thereof (or, in the event of the amount payable being the subject of contest or dispute in good faith, when the amount thereof has been determined). 9. Fees and Expenses 9.1. The Counterparty covenants with the Bank that it will reimburse, pay or discharge all costs, charges, liabilities and expenses properly incurred by the Bank, the Receiver or any attorney, manager, agent or delegate appointed by the Bank under this Deed in connection with: (a) (b) the perfection or protection of the security over the Mortgage Pool constituted by this Deed where permitted or required in accordance with Clause 3; and the exercise, or the attempted or purported exercise, or the consideration of the exercise, by or on behalf of the Bank or the Receiver of any of the powers of the Bank or the Receiver where such exercise is permitted pursuant to the provisions hereof,

204 together with any value added tax or similar tax charged or chargeable in respect thereof. 10. Liability Restriction of Liability of the Counterparty The Counterparty shall have no liability for any obligation of a Mortgage Borrower under any Loan or Mortgage or any Related Security forming part of the Mortgage Pool and nothing herein shall constitute a guarantee, or similar obligation, by the Counterparty of any such Loan or Mortgage or Related Security therefore or of any Mortgage Borrower or any other person. 11. The Bank Notwithstanding anything contained in this Deed, the exercise by the Bank of the powers and rights conferred on it by virtue of the provisions of Chapter 3 of Part 10 of the Conveyancing Act shall not be subject to any restriction on such exercise contained in section 96(1)(c) of the Conveyancing Act, and upon the Enforcement Date this Deed of Charge shall become immediately enforceable and the powers conferred by this Deed of Charge shall become immediately exercisable The restrictions on the power of sale contained in section 100 of the Conveyancing Act shall not apply to this Deed of Charge. The provisions of the Conveyancing Act relating to the power of sale and the other powers conferred by Section 100 of the Conveyancing Act (without the restrictions contained therein) are hereby extended (as if such extensions were contained in the Conveyancing Act) to authorise the Bank at its absolute discretion and upon such terms as it may think fit: (a) (b) (c) to dispose of the Charged Property, or any interest in the same, and to do so for shares, debentures or any other securities whatsoever, or in consideration of an agreement to pay all or part of the purchase price at a later date or dates, or an agreement to make periodical payments, whether or not the agreement is secured by an Encumbrance or a guarantee, or for such other consideration whatsoever as the Bank may think fit, and also to grant any option to purchase, and to effect exchanges, and nothing shall preclude the Bank from making any disposal to any person it thinks fit; with a view to, or in connection with, the disposal of the Charged Property, to carry out any transaction, scheme or arrangement which the Bank may in its absolute discretion consider appropriate; to take possession of, get in and collect the Charged Property and the restrictions on taking possession of mortgaged property contained in section 97 of the Conveyancing Act shall not apply to this Deed of Charge and, further, section 99(1) of the Conveyancing Act shall not apply to this Deed of Charge and 202

205 any obligations imposed on mortgagees in possession or receivers by virtue of the application of section 99(1) shall not apply to the Bank or any Receiver; (d) (e) (f) (g) (h) (i) (j) to appoint and engage employees, managers, agents and advisers upon such terms as to remuneration and otherwise and for such periods as it may determine, and to dismiss them; in connection with the exercise, or the proposed exercise, of any of its powers to borrow or raise money from any person, without security or on the security of the Charged Property (either in priority to this security or otherwise) and generally in such manner and on such terms as it may think fit; to bring, defend, submit to arbitration, negotiate, compromise, abandon and settle any claims and proceedings concerning the Charged Property; to transfer all or any of the Charged Property to any other body corporate or company, whether or not formed or acquired for the purpose and whether or not a Subsidiary or associated company of the Bank or a company in which the Bank has an interest; generally to carry out, or cause or authorise to be carried out, any transaction, scheme or arrangement whatsoever, whether similar or not to any of the foregoing, in relation to the Charged Property which it may consider expedient as effectually as if it were solely and absolutely entitled to the Charged Property; in connection with the exercise of any of its powers, to execute or do, or cause or authorise to be executed or done, on behalf of or in the name of the Counterparty or otherwise, as it may think fit, all documents, acts or things in relation to the Charged Property which it may consider appropriate; and to pay and discharge out of the profits and income of the Charged Property and the moneys to be made by it in carrying on any such business as aforesaid the expenses incurred in the exercise of any of the powers conferred by this Clause 11.2 or otherwise in respect of the Charged Property and all outgoings which it shall think fit to pay The notification requirement contained in section 103(2) of the Conveyancing Act shall not apply to this Deed of Charge The Bank shall be entitled to rely on the opinion or advice of any professional or financial or other advisers selected by it which is given in connection with this Deed and shall not be liable to the Counterparty for any of the consequences of such reliance or for relying on any communication or document believed by it to be genuine and correct and to have been communicated or signed by the person by whom it purports to be communicated or signed.

206 11.5. The Bank shall (save as expressly otherwise provided herein) as regards all rights, powers, authorities and discretions vested in it by this Deed, or by operation of law, have complete discretion as to the exercise or non-exercise thereof Any consent given by the Bank for the purposes of this Deed may be given on such terms and subject to such conditions (if any) as the Bank thinks fit and, notwithstanding anything to the contrary contained herein may be given retrospectively The Bank shall not be under any obligation to effect or to require any other person to maintain insurance in respect of any of the Charged Property. If the Bank in its absolute discretion effects insurance in respect of the Charged Property it shall not be subject to the requirements contained in section 110(2) of the Conveyancing Act. 12. Receiver At any time on or after the Enforcement Date the Bank may appoint such person or persons as it thinks fit to be receiver or receivers (to act jointly or severally) of the Charged Property The restrictions contained in section 108(1) of the Conveyancing Act shall not apply to this Deed of Charge The Bank may remove the Receiver appointed by it whether or not appointing another in his place, and the Bank may also appoint another receiver if the Receiver resigns The exclusion of any part of the Charged Property from the appointment of the Receiver shall not preclude the Bank from subsequently extending his appointment (or that of the Receiver replacing him) to that part The Receiver shall, so far as the law permits, be the agent of the Counterparty and the Counterparty shall be solely responsible for his acts and defaults and liable on any contracts or engagements made or entered into by him; and in no circumstances whatsoever shall the Bank be in any way responsible for any misconduct, negligence or default of his The remuneration of the Receiver may be fixed by the Bank (and may be or include a commission calculated by reference to the gross amount of all money received or otherwise) and section 108(7) of the Conveyancing Act shall not apply to the commission and/or remuneration of a receiver appointed pursuant to this Deed of Charge, but such remuneration shall be payable by the Counterparty alone. Without prejudice to the foregoing, the Bank may, but shall not be obliged to, pay such remuneration or any part thereof. The Counterparty agrees that it will pay to the Bank an amount equal to any such payment made by it, together with the Bank s cost of funding such payment until such payment by the Counterparty, which payment by 204

207 the Counterparty shall, for the avoidance of doubt, form part of the Secured Obligations The Receiver may be invested by the Bank with such of the powers, authorities and discretions exercisable by the Bank under this Deed as the Bank may think fit The Receiver shall in the exercise of his powers, authorities and discretions conform to any lawful regulations and directions from time to time made and given by the Bank The Bank may from time to time and at any time require any such Receiver to give security for the due performance of his duties as such Receiver and may fix the nature and amount of the security to be so given but the Bank shall not be bound in any case to require any such security Save so far as otherwise directed by the Bank all moneys from time to time received by such Receiver shall be paid over to the Bank to be held by it upon the terms and subject to the provisions of Clause The Bank may pay over to such Receiver any moneys constituting part of the Charged Property to the intent that the same may be applied for the purposes of this Deed by such Receiver and the Bank may from time to time determine what funds the Receiver shall be at liberty to keep in hand with a view to the performance of his duties as such Receiver. 13. Protection of Third Parties The statutory powers of sale and of appointing a receiver which are conferred upon the Bank as varied and extended by this Deed and all other powers shall in favour of any purchaser be deemed to arise and be exercisable immediately after the execution of this Deed No purchaser from, or other person dealing with, the Bank and/or the Receiver shall be concerned to enquire whether any of the powers which they have exercised or purported to exercise has arisen or become exercisable, or whether the Secured Obligations remain outstanding or whether any event has happened to authorise the Receiver to act or as to the propriety or validity of the exercise or purported exercise of any such power; and the title and position of a purchaser or such person shall not be impeachable by reference to any of those matters The receipt of the Bank or the Receiver shall be an absolute and conclusive discharge to a purchaser or such person and shall relieve him of any obligation to see to the application of any moneys paid to or by the direction of the Bank or the Receiver. 14. Protection of the Bank and Receiver Neither the Bank nor any Receiver shall be liable in respect of any loss or damage which arises out of the exercise or attempted or purported exercise of, or the failure to exercise, any of their respective powers, unless such loss or damage is caused by its or his negligence, wilful default, fraud or breach of obligations under this Deed. The

208 206 provisions of this Clause 14.1 shall be applicable also to any delegate, agent or subdelegate of the Bank as is mentioned in Clause Without prejudice to Clause 14.1, entry into possession of the Charged Property shall not render the Bank or the Receiver liable to account as mortgagee in possession or to be liable for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable; and if and whenever the Bank or the Receiver enters into possession of the Charged Property, it shall be entitled at any time to go out of such possession The Bank may, in the execution of all or any of the trusts, powers authorities and discretions vested in it by this Deed act by responsible officers or a responsible officer for the time being of the Bank. The Bank may also whenever it thinks expedient whether by power of attorney or otherwise, for a period not exceeding 12 months, delegate to any person or persons all or any of the trusts, rights, powers, duties, authorities and discretions vested in it by this Deed or appoint any agent in respect thereof. Any such delegation or appointment may be made upon such terms and conditions and subject to such regulations (including power to sub-delegate) as the Bank may think fit. The Bank shall give prompt notice to the Counterparty of the appointment of any delegate or agent as aforesaid and shall procure that any delegate shall also give prompt notice of the appointment of any sub-delegate to the Counterparty The Bank shall not, and no director, officer or employee of the Bank shall, be in any way precluded from making any contracts or entering into any transactions in the ordinary course of business with the Borrower The powers conferred by this Deed upon the Bank shall be in addition to any powers which from time to time be vested in it by general law. 15. Further Assurances The Counterparty further covenants with the Bank and every Receiver from time to time upon written demand to execute, at its own cost, any document or do any act or thing which (a) the Bank may reasonably specify (subject to clause 3.5) with a view to perfecting any charge or security created or intended to be created by this Deed, or as may be necessary or reasonable to give full effect to the arrangements contemplated by this Deed or (b) the Bank or Receiver may reasonably specify with a view to facilitating the exercise, or the proposed exercise, of any of their respective powers The Counterparty hereby by way of security for the performance of its obligations under this Deed of Charge irrevocably appoints the Bank to be the attorney of the Counterparty with effect on and from the Enforcement Date to do any acts, matters or things which the Bank considers in each case necessary or desirable for the protection or preservation of the Bank s interest in the Mortgages forming part of the Mortgage Pool and their Related Security or which ought to be done under the provisions of this

209 Deed of Charge and in its name or otherwise and on its behalf and as its act and deed to sign, seal, execute, deliver, perfect and do all deeds, instruments, acts and things which the Counterparty may or ought to do under the covenants and provisions contained in this Deed of Charge and generally in its name and on its behalf to exercise all or any of the powers, authorities and discretions conferred by or pursuant to this Deed of Charge or by any statute or common law on the Bank or any Receiver or which may be required or which the Bank shall deem fit for carrying any sale, lease, charge, mortgage or dealing by the Bank or by any Receiver into effect or for giving to the Bank or any Receiver the full benefit of this Deed of Charge and generally to use the name of the Counterparty in the exercise of all or any of the powers, authorities or discretions conferred on the Bank or any Receiver and the Counterparty hereby ratifies and confirms and agrees to ratify and confirm whatsoever any such attorney shall do or purport to do by virtue of this Clause 15.2 and all money properly expended by any such attorney shall be deemed to be expenses incurred by the Bank hereunder. 16. Other Security, etc This security is in addition to, and shall neither be merged in, nor in any way exclude or prejudice, any other Encumbrance, right of recourse or other right whatsoever which the Bank may now or at any time hereafter hold or have (or would apart from this security hold or have) as regards the Counterparty or any other person in respect of the Secured Obligations Notwithstanding anything to the contrary contained in the Conveyancing Act, the Bank reserves the right to consolidate mortgage securities without restriction The Counterparty shall not take any action under Section 94 of the Conveyancing Act in respect of the Charged Property, this Deed of Charge or any monies, obligations or liabilities hereby covenanted to be paid or discharged The powers which this Deed confers on the Bank and the Receiver are cumulative, without prejudice to their respective powers under the general law, and may be exercised as often as the Bank or the Receiver thinks appropriate. The Bank or the Receiver may, in connection with the exercise of their powers, join or concur with any person in any transaction, scheme or arrangement whatsoever; and the Counterparty acknowledges that the respective powers of the Bank and the Receiver shall in no circumstances whatsoever be suspended, waived or otherwise prejudiced by anything other than an express waiver or variation in writing No failure or delay by any party hereto in exercising any right, power, remedy or privilege under this Deed or available at law shall impair such right, power, remedy or privilege or operate as a waiver thereto. The single or partial exercise of any right, power or remedy under this Deed or at law shall not preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege under this Deed or at law. The rights, powers, remedies and privileges provided in this Deed are cumulative and not exclusive of any rights and remedies provided by law. 17. Modification, Invalidity and Transfer

210 17.1. No amendment, modification or variation of this Deed shall be effective unless it is in writing and executed by or on behalf of each of the parties hereto If any of the provisions of this Deed becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions therein shall not in any way be affected or impaired The Bank may transfer and assign this Deed and all its rights and interest herein together with any or all of the Mortgage-Backed Promissory Notes to any other Participating NCB and to any such other body corporate as the Bank may from time to time approve in writing and upon such terms and conditions, as it may think fit. 18. Safe Custody of Documents The Bank hereby undertakes with the Counterparty for the safe custody of such documents of title relating to the Charged Property of which it retains possession or control The parties agree that in the event of the loss or destruction of, or injury to, the documents of title relating to the Charged Property, the Bank shall have no liability to the Counterparty: (a) if the loss, destruction or injury occurred: (i) (ii) prior to the actual receipt of the documents of title in question by the Bank from the Counterparty or the Counterparty s solicitor, or after the documents of title in question have been given by the Bank to some other person at the written request of the Counterparty and before the documents have been received back by the Bank, (b) for any damage suffered by the Counterparty as a result of the loss or destruction of, or injury to, the documents of title in question where such damages: (i) (ii) do not directly and naturally result from that loss, destruction or injury, or relate to loss of profit or expected profit from the Counterparty s business or from the development of the Charged Property This Clause 18 shall be regarded as an undertaking for safe custody of documents of title given under Section 84 of the Conveyancing Act. 19. Avoidance of Payments No assurance, security or payment which may be avoided or adjusted under any applicable law, and no release, settlement or discharge given or made by the Bank or 208

211 any Receiver on the faith of any such assurance, security or payment, shall prejudice or affect the right of the Bank or any Receiver to recover from the Counterparty (including any moneys which it may be compelled by due process of law to refund pursuant to the provisions of any law relating to liquidation, bankruptcy, insolvency or creditors rights generally and any costs payable by it to or otherwise incurred in connection with such process) or to enforce the security created by or pursuant to this Deed of Charge to the full extent of the Secured Obligations. 20. Governing Law and Jurisdiction This Deed of Charge, and all non-contractual disputes arising from or connected with this Deed of Charge, shall be governed by and construed in accordance with the laws of Ireland The Courts of Ireland shall have exclusive jurisdiction to settle any dispute (including claims for set-off and counterclaim) which may arise in connection with the creation, validity, effect, interpretation or performance of this Deed or the legal relationships established herein or otherwise arising in connection herewith, and for such purposes the parties hereto irrevocably submit to the jurisdiction of the Irish Courts.

212 IN WITNESS WHEREOF the parties hereto have caused this Deed to be executed on the day and year first above written. The common seal of [Counterparty] was affixed to this Deed of Charge and this Deed of Charge was delivered: Director Director/Secretary The common seal of CENTRAL BANK OF IRELAND was affixed hereto in the presence of: Witness: Occupation: Address: 210

213 Schedule 6 1. Basis of Opinion Material to be Contained in Legal Opinion For the purpose of this Opinion, we have examined the following: (a) Copies of the following documents (the Transaction Documents ) namely: (i) (ii) (iii) a Framework Agreement dated today made between the Counterparty and the Bank; a Deed of Charge dated today made between the Counterparty and the Bank; a standard form of Mortgage-Backed Promissory Note (scheduled to the Framework Agreement) which it is intended would be issued from time to time by the Counterparty to the Bank. (b) A copy of the Counterparty s standard home loan facility letter and mortgage (the Standard Documentation ). [In rendering the opinions set out in paragraph 3 below we have had regard to the opinion of Michael Collins SC dated 22 February 1999.] 2. Assumptions We have assumed for the purposes of this Opinion (without any responsibility on our part if any assumption proves to have been untrue or incorrect since we have not independently verified any assumption): Data Protection Act 1988 and Duty of Confidentiality That prior to crystallisation or enforcement of the Deed of Charge there will in accordance with clause 4 of the Framework Agreement be no disclosure of personal data (within the meaning of the Data Protection Act 1988) or of confidential information. 3. Opinion On the basis described in Section 1 above, under the assumptions set out in Section 2 above, we are of the opinion as follows: Authorisations and Consents (a) The execution and delivery by the Company of the Transaction Documents which have to date been executed and the performance by the Counterparty of its obligations under those Transaction Documents does not require on the part

214 of the Counterparty any consent, licence, approval or authorisation of any governmental or regulatory body or official of Ireland. (b) (c) The creation of the Deed of Charge constitutes a transfer of the benefit of the Mortgages the subject of the Deed of Charge and the crystallisation and/or enforcement of the Deed of Charge constitutes a transfer of the Mortgages the subject of the Deed of Charge and/or a transfer of the benefit of such Mortgages. The Standard Documentation of the Counterparty authorises the Counterparty to enter into and perform the Finance Documents since it authorises the Company (i) (ii) to grant the Deed of Charge in that it contains a consent from the Mortgage Borrower to the transfer of the benefit of or the creation of a charge over the Mortgage, and for the purpose of or in connection with any proposed transfer of the benefit of a Mortgage, to disclose such information, including personal data, as the transferee may reasonably require. Based on the foregoing no further consents of the Mortgage Borrower are required in this connection. 212

215 IN WITNESS whereof the parties hereto have executed this Agreement the day and year first above written. EXECUTED on behalf of [COUNTERPARTY] EXECUTED on behalf of CENTRAL BANK OF IRELAND:

216 9.3 Master Substitution Agreement in respect of Eurosystem Operations THIS MASTER SUBSTITUTION AGREEMENT is made the day of, BETWEEN: [COUNTERPARTY], of [specify] (the Counterparty ); and CENTRAL BANK OF IRELAND of PO Box 559, Dame Street, Dublin 2 (the Bank ) WHEREAS: A. The Bank and the Counterparty may from time to time, in respect of the Transaction Structure (as defined in clause 1.1(c)) by which any Eurosystem Operation Liquidity is at any given time provided, agree that such Eurosystem Operation Liquidity shall thereafter be provided pursuant to an alternative form of Transaction Structure. B. The purpose of this Master Substitution Agreement (this Agreement ) is to set out the process for entering into, and giving effect to, any agreement referred to at Recital (A). IT IS HEREBY AGREED as follows: 1. Definitions 1.1. In this Agreement: (a) (b) (c) terms used with respect to an Existing Transaction or Substitution Transaction which are not defined herein shall have the meanings given to them in the Existing Transaction Documentation or, as applicable, Substitution Transaction Documentation; terms used which are not defined herein or given a meaning in accordance with clause 1.1(a), but are defined in the Framework Agreement, have the meanings given to them in the Framework Agreement; and unless the contrary intention appears, the following terms shall have the following meanings: Advance means an advance from the Bank to the Counterparty that is entered into pursuant to the MPIPs Document as supplemented by the Framework Agreement; this Agreement has the meaning given to it in Recital (B); Authorisation has the meaning given to it in clause 4.4; Balancing Note has the meaning given to it in clause 5.1(b); Balancing Transaction means any Balancing Note or Modified Continued Advance; Business Day means any day on which the Bank is open for conducting Eurosystem monetary policy operations; this will be any day other than Saturdays, Sundays, New 214

217 Year s Day, Good Friday, Easter Monday, 1 May, Christmas Day and 26 December and any other days as notified by the Bank to the Counterparty from time to time; Confirmation Supplement, in respect of a: (a) (b) Modified Continued Advance, has the meaning given to it in clause 5.2(c); and Substitution Advance, has the meaning given to it in clause 6.2(b); Eurosystem Operation Liquidity means, in respect of any Eurosystem Operation, the liquidity allotted to, or otherwise received by, the Counterparty pursuant thereto; Existing Transaction has the meaning given to it in clause 3.1; Existing Transaction Documentation means, in respect of any Existing Transaction at any time, the Transaction Documentation at such time relating to transactions having the Transaction Structure of that Existing Transaction; Existing Transaction Liquidity Amount means, in respect of any Substitution Agreement, the amount of the Eurosystem Operation Liquidity which is represented by the Existing Transaction at the Relevant Substitution Date; Framework Agreement means, at any time, an agreement between the Bank and the Counterparty in the form of the Bank s Framework Agreement in respect of Eurosystem Operations secured over Collateral Pool Assets at that time (which form is, at the date of this Agreement, provided for in the MPIPs Document); Irish Assets SMBPN means a Special Mortgage-Backed Promissory Note, within the meaning of the MPIPs Document, issued by the Counterparty that is secured over certain interests of the Counterparty in certain mortgage loans secured on residential properties within Ireland; Irish SMBPN Framework Agreement means, at any time, an agreement between the Bank and the Counterparty in the form of the Bank s Framework Agreement in respect of the issue of Irish Assets SMBPNs at that time (which form is, at the date of this Agreement, provided for on the Bank s website; MBPN means a Mortgage-Backed Promissory Note, within the meaning of the MPIPs Document, issued by the Counterparty; MBPN Framework Agreement means, at any time, an agreement between the Bank and the Counterparty in the form of the Bank s Framework Agreement in respect of the issue of MBPNs at that time (which form is, at the date of this Agreement, provided for in the MPIPs Document); Modified Continued Advance has the meaning given to it in clause 5.2(b); Nominal Amount means, in respect of any MBPN, the nominal amount thereof and, in the case of any Irish Assets SMBPN or UK Assets SMBPN, the Nominal Amount thereof, in each case within the meaning of the relevant Transaction Documentation; Promissory Note means a MBPN, an Irish Assets SMBPN or a UK Assets SMBPN; Relevant Documents means, at any time, this Agreement, all Transaction Documentation and all documentation entered into pursuant to any thereof (in the case of the MPIPs Document and any document entered into pursuant thereto, insofar as it relates to the arrangements the subject of this Agreement and the Transaction

218 Documentation) and any other document agreed in writing by the parties, or designated by the Bank by notice to the Counterparty, as a Relevant Document, in each case at such time; Relevant Eurosystem Operation has the meaning given to it in clause 3.1; Relevant Substitution Date has the meaning given to it in clause 3.1; Substituted Advance has the meaning given to it in clause 5.2; Substituted Liquidity Amount has the meaning given to it in clause 3.1; Substituted Note has the meaning given to it in clause 5.1; Substitution Advance has the meaning given to it in clause 6.2; Substitution Agreement has the meaning given to it in clause 3.1; Substitution Note has the meaning given to it in clause 6.1; Substitution Transaction has the meaning given to it in clause 3.1(b); Substitution Transaction Documentation means, in respect of any Substitution Transaction at any time, the Transaction Documentation at such time relating to transactions having the Transaction Structure of that Substitution Transaction; Substitution Transaction Structure has the meaning given to it in clause 3.1(b); Successor in relation to any person means an assignee or successor in title of such person or any person who, under the laws of that first mentioned person s jurisdiction of incorporation or domicile, has assumed the rights and obligations of such first mentioned person or to whom under such laws the same have been transferred; Transaction Structure means any of the following: (a) (b) (c) (d) an advance from the Bank to the Counterparty represented by a MBPN; an advance from the Bank to the Counterparty represented by an Irish Assets SMBPN; an advance from the Bank to the Counterparty represented by a UK Assets SMBPN; and an Advance; Transaction Documentation means, in respect of any Transaction Structure at any time, the documentation between the Counterparty and the Bank at such time relating to transactions having that Transaction Structure; UK Assets SMBPN means a Special Mortgage-Backed Promissory Note, within the meaning of the MPIPs Document, issued by the Counterparty that is secured over certain interests of the Counterparty in certain mortgage loans secured on residential properties within England, Wales, Scotland and Northern Ireland; and 216 UK SMBPN Framework Agreement means, at any time, an agreement between the Bank and the Counterparty in the form of the Bank s Framework Agreement in respect

219 of the issue of UK Assets SMBPNs at that time (which form is, at the date of this Agreement, provided for on the Bank s website The headings and the contents page in this Agreement shall not affect its interpretation. Clause and Appendix headings are for ease of reference only Words denoting the singular number only shall include the plural number also and vice versa. Words denoting one gender only shall include the other gender References to Recitals, clauses, paragraphs and Appendices shall, unless the context otherwise requires, be to Recitals, clauses, paragraphs and Appendices in this Agreement The words hereof, hereunder, herein and similar words shall be construed as references to this Agreement as a whole and not limited to the particular clause, paragraph or provision in which the relevant reference appears. The words include or including shall be construed as meaning include without limitation or including without limitation, as applicable Reference to a company shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or established and reference to a person shall be construed so as to include any individual, firm, company, corporation, undertaking, government, state or agency of a state, or any association or partnership (whether or not having separate legal personality) References to any person shall be construed so as to include its Successors and any Successor of such a Successor in accordance with their respective interests provided that reference to any party to this Agreement in its capacity as such shall include its Successors and assigns only if and to the extent that such succession or assignment is contemplated or permitted herein Reference in this Agreement to any statute or statutory provision shall unless otherwise stated be to a statute or statutory provision of or applicable in Ireland and shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted or any statutory instrument, order or regulation made thereunder or under any such statutory amendment, modification or re-enactment. Reference to any European Union legislative provision shall be construed as encompassing, where relevant, reference to: (a) (b) (c) the same as it may have been, or may from time to time be, amended, replaced or consolidated; any legislative provision amending, replacing or consolidating such provision; and/or any legislative provision, order or regulation implementing such provision or made thereunder Reference in this Agreement to any document (including, for the avoidance of doubt, the MPIPs Document) shall include reference to such document as varied, supplemented, novated or replaced from time to time Reference in this Agreement to any cost, charge or expense includes reference to any value added tax or similar tax charged or chargeable in respect thereof.

220 1.11. References to Ireland shall not encompass Northern Ireland. 2. Warranties and representations 2.1. The Counterparty warrants and represents to the Bank that: (a) (b) it is a body corporate duly organised under the laws of the Counterparty Jurisdiction with power to enter into all Relevant Documents and to exercise its rights and perform its obligations hereunder and thereunder; it has duly taken all corporate and other action and received the consent of any third party that in either case is required: (i) (ii) to authorise its execution and, where applicable, delivery of each Relevant Document and the performance of its obligations thereunder; and to ensure the validity and enforceability in accordance with the respective terms of each such Relevant Document (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances and the time barring of claims); (c) (d) (e) in any proceedings taken in relation to any of the Relevant Documents, it will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process; the obligations expressed to be assumed by it in each of the Relevant Documents are legal and valid obligations binding on it in accordance with the terms hereof and thereof (subject to the principles of equity, all applicable laws relating to insolvency, bankruptcy, court protection, reorganisation or analogous circumstances and the time barring of claims); and it has not taken any corporate action nor have any other steps been taken nor legal proceedings been started or threatened against it for its winding-up, dissolution or re-organisation or for the appointment of a receiver, an examiner, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues All the warranties and representations in this clause 2 are made by the Counterparty on the date of this Agreement and are deemed to be made by the Counterparty on each date on which a Substitution Agreement is entered into and on the Relevant Substitution Date in respect of each such Substitution Agreement, in each case by reference to the facts and circumstances existing at the date it is deemed to be made. 3. Substitutions of Transaction Structure of Eurosystem Operations 3.1. The Bank and the Counterparty may from time to time agree (a Substitution Agreement ) that, in respect of an amount (in respect of a Substitution Agreement, the Substituted Liquidity Amount ) of the Eurosystem Operation Liquidity in respect of a Eurosystem Operation (in respect of the Substitution Agreement, the Relevant Eurosystem Operation, the transaction between the Bank and the Counterparty in respect of the relevant Substituted Liquidity Amount being the Existing Transaction ), with effect from a specified Business Day (in respect of the Substitution Agreement 218

221 and the Relevant Eurosystem Operation, the Relevant Substitution Date ) the Substituted Liquidity Amount shall, simultaneously: (a) cease to be: (i) (ii) constituted as the Existing Transaction; and governed by the Existing Transaction Documents; and (b) become: (iii) (iv) constituted as an alternative transaction under an alternative form of Transaction Structure (in respect of the relevant Substitution Agreement and Relevant Eurosystem Operation, such alternative form being the Substitution Transaction Structure and such alternative transaction being the Substitution Transaction ); and governed by the Substitution Transaction Documentation, so that the Substitution Transaction takes effect, and the Existing Transaction is accordingly modified or replaced, as applicable, and the Substituted Liquidity Amount shall continue to be made available by the Bank to the Counterparty in accordance with the terms of the Relevant Eurosystem Operation as supplemented by the relevant Substitution Transaction Documentation, as more particularly described in clauses 4, 5 and 6 of this Agreement The purpose of this Agreement is to: (a) (b) set out the process for entering into a Substitution Agreement and related Substitution Transaction and modifying or replacing, as applicable, the related Existing Transaction accordingly; and confirm the parties further agreement that if at any time any Transaction Documentation or transaction thereunder pursuant to which any Eurosystem Operation Liquidity is allotted or otherwise received is not in full compliance with the then applicable risk control procedures of the Bank (as the same may have been amended to ensure compliance with applicable Eurosystem requirements), the Counterparty shall, on the request of the Bank and at its own cost, enter into such documentation and do such acts and things as the Bank shall reasonably require in order to ensure that such transaction and Transaction Documentation complies in all respects with such risk control procedures. 4. Substitution process 4.1. A Substitution Agreement shall be entered into in respect of a Relevant Eurosystem Operation by the Bank and the Counterparty agreeing (which agreement may be entered into orally or in writing) the following: Relevant Eurosystem Operation; Relevant Substitution Date; Substituted Liquidity Amount; Existing Transaction; and Substitution Transaction Structure.

222 4.2. For the avoidance of doubt, the Bank shall not enter into a Substitution Agreement unless: (a) (b) it is established to the Bank s satisfaction that neither the taking effect of that Substitution Agreement and the related Substitution Transaction, nor any related modification or replacement, as applicable, of the Existing Transaction, would cause the Counterparty to breach any contractual obligation binding on it pursuant to the Transaction Documentation; and where the Existing Transaction is a MBPN, the Bank is the sole Beneficiary of the MBPN on the Substitution Date The Counterparty shall, in respect of any Substitution Agreement or proposed Substitution Agreement, comply with any related procedures from time to time provided for in the MPIPs Document, whether in respect of any: (a) (b) such Substitution Agreement or proposed Substitution Agreement, as applicable; related Substitution Transaction or Balancing Transaction, subject to any modifications to those procedures expressly provided for in this Agreement Where the Substitution Transaction Structure is a Promissory Note, or the Substitution Agreement involves the issue of a Balancing Note, the Counterparty shall, prior to the agreement referred to at clause 4.1, unless otherwise notified by the Bank and regardless of whether it is required pursuant to the Substitution Transaction Documentation, provide to the Bank an authorisation in respect of the completion of the relevant Substitution Note or Balancing Note, as applicable (in respect thereof, the Authorisation ). Such Authorisation shall: (a) (b) (c) be in the form set out in Appendix A or such other form as the Bank notifies to the Counterparty from time to time; comply with any requirements in respect of the terms of the relevant Balancing Note or Substitution Note, as applicable, provided for in clause 5.1(b) or, as applicable, clause 6.1; and be given by or fax (or such other means as may be notified by the Bank to the Counterparty from time to time), 220 and, without prejudice to the generality of clause 4.6, this clause 4.4 shall replace any applicable requirements of the Substitution Transaction Documentation regarding the provision by the Counterparty of an authorisation to the Bank in respect of the issue of a Promissory Note, insofar as they would otherwise apply in respect of the issue of any Substitution Note or Balancing Note In respect of any Substitution Agreement, on the Relevant Substitution Date the following shall be deemed to occur simultaneously (provided that, if any action is required to be taken by the Bank in order to give effect to any of the following, all of the following shall be deemed to occur simultaneously with effect from the taking of such action or, if more than one action is required to be taken, that which is the last to be taken):

223 (a) (b) the Existing Transaction shall be modified or replaced, as applicable, in accordance with the provisions outlined in clause 5 applicable to transactions having the Transaction Structure of the Existing Transaction; and the Substitution Transaction shall take effect in accordance with the provisions outlined in clause 6 applicable to the Substitution Transaction Structure For the avoidance of doubt, to the extent that the provisions of this Agreement conflict with any other arrangements between the Bank and the Counterparty for the substitution of an Existing Transaction with a Substitution Transaction, howsoever described, the provisions of this Agreement shall supersede and replace such other arrangements (save to the extent that this Agreement is expressly disapplied or varied by those other arrangements). The terms of any Transaction Documentation shall be read subject to the provisions of this Agreement. For the avoidance of doubt, the provisions of this clause 4.6 are without prejudice to any substitutions effected pursuant to any other arrangements between the Bank and the Counterparty prior to the date on which this Agreement takes effect. 5. Modification or replacement of Existing Transaction 5.1. Existing Transaction is a Promissory Note Where the Existing Transaction is a Promissory Note (the Substituted Note ), on the Relevant Substitution Date: (a) (b) if the Existing Transaction Liquidity Amount is equal to the Substituted Liquidity Amount, the Substituted Note shall be cancelled and the parties shall cease to have any rights and obligations in respect thereof, save to the extent that they relate to any amounts which accrued due and payable thereunder prior to the Relevant Substitution Date; and where the Substituted Liquidity Amount is less than the Existing Transaction Liquidity Amount, the Bank, in accordance with the related Authorisation, shall complete and deliver, and upon such completion hold for the Bank s own account, a Promissory Note (in respect of the Substituted Note, the Balancing Note ) on the same terms as the Substituted Note save: (i) (ii) to the extent otherwise provided in the Authorisation; the issue date of the Balancing Note shall be: A. deemed for all relevant purposes (including the calculation from time to time of any amount payable by the Counterparty to the Bank that is required to be calculated by reference to such issue date, whether for the purposes of the Existing Transaction Documentation or any other agreement between the Bank and the Counterparty); and B. expressed, to be the date on which the Eurosystem Operation Liquidity or the Relevant Eurosystem Operation was made available to the Counterparty; and (iii) the interest payable by the Counterparty to the Bank in respect of the Balancing Note on the Maturity Date thereof shall be the aggregate of the

224 sum, calculated in respect of each day of the term of the Relevant Eurosystem Operation, including the issue date of the Balancing Note but excluding the Maturity Date of the Balancing Note, by reference to the following formula: B i where: B = the Liquidity Provided Amount specified in the Balancing Note; and i = the interest rate applicable to the Relevant Eurosystem Operation for that day (if any), expressed as a decimal. The Balancing Note shall, upon its completion and delivery in accordance with this clause 5.1(b), replace the Substituted Note and the Substituted Note shall be cancelled Existing Transaction is an Advance Where the Existing Transaction is an Advance (the Substituted Advance ), on the Relevant Substitution Date: (a) (b) (c) if the Existing Transaction Liquidity Amount is equal to the Substituted Liquidity Amount, the Substituted Advance shall be cancelled and the parties shall cease to have any rights and obligations in respect thereof, save to the extent that they relate to any amounts which accrued due and payable thereunder prior to the Relevant Substitution Date; and where the Substituted Liquidity Amount is less than the Existing Transaction Liquidity Amount, the terms of the Substituted Advance shall be modified accordingly but otherwise remain in full force and effect (the Substituted Advance as so modified, the Modified Continued Advance ); and the Bank shall, in respect of any Modified Continued Advance and promptly following the Relevant Substitution Date, deliver to the Counterparty a document in the form of Appendix B (in respect of the Modified Continued Advance, a Confirmation Supplement ). A Confirmation Supplement shall, together with the Confirmation of the Substituted Advance, constitute prima facie evidence of the terms of the Modified Continued Advance unless objection is made with respect to the Confirmation Supplement promptly after receipt thereof by the Counterparty. For the avoidance of doubt, failure by the Bank to deliver a Confirmation Supplement shall not affect the validity of the Substitution Agreement or the related Modified Continued Advance. 6. Initiation of Substitution Transaction 6.1. Substitution Transaction is a Promissory Note Where the Substitution Transaction is a Promissory Note (the Substitution Note ) on the Relevant Substitution Date the Bank, in accordance with the related Authorisation, 222

225 shall complete and deliver, and upon such completion hold for the Bank s own account, the Substitution Note on the following terms, and the Substitution Note shall become effective upon such completion: (a) notwithstanding the completion and delivery of the Promissory Note on the Substitution Date, thereafter and in consideration of the Substitution Agreement, the issue date of the Substitution Note shall be: (i) (ii) deemed for all relevant purposes (including the calculation from time to time of any amount payable by the Counterparty to the Bank that is required to be calculated by reference to such issue date, whether for the purposes of the Substitution Transaction Documentation or any other agreement between the Bank and the Counterparty); and expressed, to be the date on which the Substituted Liquidity Amount was allotted to, or otherwise received by, the Counterparty pursuant to the Relevant Eurosystem Operation; and (b) the interest payable by the Counterparty to the Bank in respect of the Substitution Note on the maturity date thereof shall be the aggregate of the sum, calculated in respect of each day of the term of the Relevant Eurosystem Operation, including the issue date of the Substitution Note but excluding the maturity date of the Substitution Note, by reference to the following formula: B i where: B = the Liquidity Provided Amount specified in the Substitution Note; and i = the interest rate applicable to the Relevant Eurosystem Operation for that day (if any), expressed as a decimal Substitution Transaction is an Advance Where the Substitution Transaction is an Advance (a Substitution Advance ), on the Relevant Substitution Date: (a) (b) the Bank will be deemed to have advanced an Advance pursuant to the Substitution Transaction Documentation on the terms set out in Appendix C Part I, and the Bank will, for the purposes of the Substitution Transaction Documentation, be deemed to have delivered to the Counterparty on the Relevant Substitution Date a Confirmation of the Substitution Advance in the form of Appendix C Part I; and the Bank shall, promptly following the Relevant Substitution Date, deliver to the Counterparty a document in the form of Appendix C Part II (in respect of the Substitution Advance, a Confirmation Supplement ). A Confirmation Supplement shall constitute prima facie evidence: (i) of the terms required to be included therein as agreed between the Bank and the Counterparty for the Substitution Advance; and

226 (ii) together with the Confirmation of the Substitution Advance deemed to have been delivered pursuant to clause 6.2(a), of the terms of the Substitution Advance as agreed by the Bank and the Counterparty, unless objection is made with respect to the Confirmation Supplement promptly after receipt thereof by the Counterparty. For the avoidance of doubt, failure by the Bank to deliver a Confirmation Supplement shall not affect the validity of the Substitution Agreement or the related Substitution Advance. 7. Notices Any notices to be given pursuant to this Agreement to either of the parties shall be sufficiently served if delivered in accordance with the requirements of the Framework Agreement in respect thereof and shall be deemed served as provided for in the Framework Agreement. 8. Entire agreement and variation 8.1. This Agreement sets out the entire agreement and understanding between the parties in respect of the subject matter hereof No variation of this Agreement shall be effective unless it is in writing and signed by (or by some person duly authorised by) each of the parties save that the Bank may, by notice to the Counterparty, effect any variation that, in the Bank s absolute discretion, is required to ensure compliance with applicable Eurosystem requirements, which notice may, notwithstanding any other provision of this Agreement, be effected by inclusion of the relevant information in the MPIPs Document in accordance with the terms thereof. 9. Waiver and severability 9.1. Exercise or failure to exercise any right under this Agreement shall not, unless otherwise provided herein, constitute a waiver of that or any other right If any of the provisions hereof should be or become invalid in whole or in part, the other provisions shall remain in force. The invalid provisions shall, according to the intent and purpose of the Agreement, be replaced by such valid provision which in its economic effect comes as close as legally possible to that of the invalid provision. The same shall apply with respect to involuntary gaps herein. 10. Assignment The Bank may transfer and assign any or all of its rights, interest and obligations in and under this Agreement to such person, and upon such terms and conditions, as the Bank thinks fit. The Bank shall be entitled to provide any information concerning the Counterparty, the Relevant Documents and the Relevant Eurosystem Operations to any Successor, assignee or proposed Successor or assignee or to any person who may otherwise enter into contractual relations with the Bank in relation to this Agreement, any other Relevant Document or the Relevant Eurosystem Operations. The Counterparty may not transfer, assign or otherwise deal in any of its rights, interest and obligations in and under any of this Agreement, any other Relevant Document or the Relevant Eurosystem Operations without the prior written consent of the Bank. 224

227 11. Termination This Agreement may at any time be terminated by either party by giving to the other not less than 30 days prior notice in writing (such termination becoming effective upon expiry of such notice), provided that such termination shall not take effect with respect to any Substitution Agreement in respect of which the agreement referred to at clause 4.1 has been entered into. 12. Costs and expenses The Counterparty agrees, in respect of this Agreement and each Substitution Agreement: (a) (b) to pay and bear its own costs and expenses incurred in connection therewith; to pay or reimburse to the Bank all the Bank s reasonable costs and expenses (including legal expenses) incurred in connection with: (i) (ii) the preparation, negotiation, execution and delivery thereofor in respect of any documentation referred to therein; the exercise and enforcement of any of the Bank s rights thereunder. 13. Determinations Any determination by the Bank under or in connection with this Agreement is, in the absence of manifest error, conclusive evidence of the matters to which it relates. 14. Governing law and jurisdiction This Agreement and each Substitution Agreement (including any non-contractual obligations arising out of or in connection with them) shall be governed by and construed in accordance with the laws of Ireland The Courts of Ireland shall have exclusive jurisdiction (without prejudice to the competence of the Court of Justice of the European Union) to settle any dispute (including claims for set-off and counterclaim) which may arise in connection with the creation, validity, effect, interpretation or performance of this Agreement or any Substitution Agreement or the legal relationships established herein or therein or otherwise arising in that connection (including any non-contractual obligations arising out of or in connection with it or them), and for such purposes the parties hereto irrevocably submit to the jurisdiction of the courts of Ireland.

228 Appendix A [Form of Authorisation] Authorisation to complete [Special] 106 Mortgage-Backed [ ] 107 Promissory Note Given pursuant to clause 2.7 of the Framework Agreement in respect of [Special] 108 Mortgage- Backed [ ] 109 Promissory Notes [(UK Assets)] 110 between the (the Bank ) and [specify] (the Counterparty ) dated [specify], as amended from time to time, (as so amended, the Framework Agreement ) and clause 4.1 of the Master Substitution Agreement dated [specify] between the Bank and the Counterparty (the MSA ) and the [Balancing][Substitution] Note proposed to be issued in connection with a Substitution Agreement proposed by the Counterparty to be entered into with a Substitution Date of [specify] in connection with Relevant Eurosystem Operation having reference [specify]. Terms used in this Authorisation and not defined herein have the meanings given to them in the Framework Agreement or the MSA, as the context requires or permits. Details authorised to be inserted. Issue date: In accordance with the terms of the MSA, [specify], being the date on which the Eurosystem Operation Liquidity the subject of the Relevant Eurosystem Operation was made available to the Counterparty. Nominal amount of the [Special] 111 Mortgage-Backed [ ] 112 Promissory Note: Liquidity Provided Amount: Interest Rate: Maturity Date: [specify] [specify: an amount equal to, in respect of a Balancing Note, the Existing Transaction Liquidity Amount less the Substituted Liquidity Amount and, in respect of a Substitution Note, the Substituted Liquidity Amount] Interest payable on the [Special] 113 Mortgage- Backed [ ] 114 Promissory Note to be calculated as specified in the MSA. [specify] Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. Insert if the Promissory Note is an Irish Assets SMBPN or a UK Assets SMBPN. 226

229 [Name and address of any relevant other Participating NCB/relevant Eligible Counterparty: Not applicable.] 115 Date: [specify] Authorised Signature(s): [Counterparty] 115 Insert if the Promissory Note is an MBPN.

230 Appendix B [Form of Confirmation Supplement of a Modified Continued Advance] Confirmation Supplement of a Modified Continued Advance modified pursuant to clause 5.2 of the Master Substitution Agreement between the (the Bank ) and [specify] (the Counterparty ) dated [specify] (as the same has been or may from time to time be amended, the MSA ) relating to the Substitution Agreement, Existing Transaction and Relevant Substitution Date referenced below. Terms used in this Confirmation Supplement and not defined herein have the meanings given to them in the Framework Agreement or the MSA, as the context requires or permits. Counterparty Substitution Agreement Reference Number Relevant Eurosystem Operation Reference Number Substituted Advance Reference Number Relevant Substitution Date Substituted Liquidity Amount Liquidity Provided Amount of Modified Continued Advance [specify - this will be an amount equal to the Existing Transaction Liquidity Amount less the Substituted Liquidity Amount] Signed.. on behalf of the 228

231 Appendix C Part I [Form of deemed Confirmation of a Substitution Advance] To: [Counterparty] (the Counterparty ) Fax: Attn: From: ( Bank ) Fax: Attn. [Date] Framework Agreement in respect of Eurosystem Operations secured over Collateral Pool Assets between the Bank and the Counterparty dated as of [specify] (as the same has been or may from time to time be, amended or supplemented, the Framework Agreement ) Master Substitution Agreement between the Bank and the Counterparty dated as of [specify] (as the same has been or may from time to time be amended, the MSA ) The purpose of this document (this Confirmation ), a Confirmation for the purposes of the Framework Agreement, is to set out the terms and conditions of a Substitution Advance (the Relevant Substitution Advance ). This Confirmation supersedes and replaces any Confirmation of the Relevant Substitution Advance issued prior to the date of this Confirmation. All provisions contained in the Framework Agreement govern this Confirmation except as expressly modified and/or supplemented below. Terms used in this Confirmation Supplement and not defined herein have the meanings given to them in the Framework Agreement or the MSA, as the context requires or permits. The Relevant Substitution Advance is a Substitution Advance deemed to have been advanced by the Bank to the Counterparty pursuant to clause 6.2(a) of the MSA in respect of the Substitution Agreement between the Bank and the Counterparty in respect of which the: (a) (b) (c) Substitution Agreement reference number; Relevant Substitution Date; Substituted Liquidity Amount;

232 (d) (e) (f) Relevant Eurosystem Operation; Liquidity Provided Amount of the Relevant Substitution Advance; and Relevant Substitution Advance reference number, are as set out in in the Confirmation Supplement in respect of the Relevant Substitution Advance. [Authorised Signator[y][ies]] 230

233 Appendix C Part II [Form of Confirmation Supplement of a Substitution Advance] Confirmation Supplement of a Substitution Advance deemed to have been advanced by the Bank to the Counterparty pursuant to clause 6.2(a) of the Master Substitution Agreement between the (the Bank ) and [specify] (the Counterparty ) dated as of [specify] (as the same has been or may from time to time be amended, the MSA ) relating to the below Existing Transaction, and Substitution Agreement. Terms used in this Confirmation Supplement and not defined herein have the meanings given to them in the Framework Agreement or the MSA, as the context requires or permits. Counterparty Substitution Agreement Reference Number Relevant Eurosystem Operation Reference Number Substitution Advance reference number Relevant Substitution Date Substituted Liquidity Amount Liquidity Provided Amount of Substitution Advance [specify - this will be an amount equal to the Substituted Liquidity Amount] Signed.. on behalf of the

234 IN WITNESS whereof the parties hereto have executed this Agreement the day and year first above written. EXECUTED on behalf of [COUNTERPARTY]: EXECUTED on behalf of CENTRAL BANK OF IRELAND: 232

235 ANNEX 1 PRO FORMA PROCEDURES Bidding Procedure for Eurosystem Main Refinancing Operations - Standard Tender 234 Bidding Procedures for Eurosystem Longer-Term Refinancing Operations - Standard Tender 238 Bidding Procedure for Eurosystem Structural Operations - Standard Tender 242 Bidding Procedure for Eurosystem Fine-Tuning Operations - Quick Tender 246 Settlement Procedures for the mobilisation of collateral in liquidity providing operations (including the provision of intra-day credit and Marginal Lending Facility) 250 Settlement Procedures for the mobilisation of collateral in liquidity absorbing operations 269 Bidding/Settlement Procedure for Eurosystem Fine-Tuning Operations FX Swaps - Quick Tender 270 Bidding/Settlement Procedure for Eurosystem Fine-Tuning Operations Fixed-Term Deposit - Quick Tender 275 Bidding/Settlement Procedure for Eurosystem USD Operations - Quick Tender 280 Procedure for Bilateral Operations 284 Procedures for Counterparties in respect of Outright Transactions 285 Procedures for Counterparties in respect of Standing Facilities 286 Procedures in respect of Minimum Reserve Requirements Accounts 288

236 BIDDING PROCEDURE FOR EUROSYSTEM MAIN REFINANCING OPERATION STANDARD TENDER Normal timeframe (Irish time) Monday 2.30 p.m. Tender announcement by ECB Tuesday 8.30 a.m. Deadline for Counterparty submission of bids a.m. Announcement of tender result by ECB a.m. Certification of individual allotment results by the Bank Wednesday Settlement Submission of Bids Bids must be submitted for a minimum amount of 1,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of 100,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Bids must be submitted on the prescribed form (see reverse). Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) iii) iv) state the respective interest-rate quotations, up to maximum of ten (variable rate tender only); ensure that bids are a multiple of 0.01 percentage points (variable rate tenders); and ensure that they have a sufficient amount of eligible underlying assets to cover their tender bids (making allowance for the haircut). Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank ( ) or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new revised bid will only be accepted if it is received prior to the specified ECB deadline. 234

237 The contractual arrangements in place allow the Eurosystem to impose penalties if a counterparty is not able to transfer a sufficient amount of underlying assets to settle the amount of liquidity it has been allotted in a tender operation. The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids higher than the marginal interest rate are satisfied in full at the marginal interest rate. In a multiple rate variable rate tender, bids higher than the marginal interest rate are also satisfied in full but at the actual rates tendered.

238 EUROSYSTEM MAIN REFINANCING OPERATION COUNTERPARTY BID SUBMISSION STANDARD TENDER 1 Insert the name of your organisation and the reference number of the tender operation you want to participate in (to be found in the Eurosystem tender announcement). 2 In a fixed rate tender enter only the total amount bid. 3 In a variable rate tender, enter your bids in the list, filling in the amount bid (expressed in millions) and the interest-rate quotation with a maximum of two decimals. Counterparty Name: Bank A Tender Ref. No.: No. Amount Interest rate 1 5,000, % 2 20,000, % 3 75,000, % 100,000,000 Total amount Bid Minimum Maximum 4 Fill in the total bid amount submitted by your organisation. 5 For variable rate tenders, fill in the minimum and the maximum interest-rate bid. 236

239 EUROSYSTEM MAIN REFINANCING OPERATION COUNTERPARTY BID SUBMISSION STANDARD TENDER Counterparty Name: Tender Ref. No.: No. Amount Interest rate Total amount bid Minimum Maximum Authorised Signature

240 BIDDING PROCEDURE FOR EUROSYSTEM LONGER-TERM REFINANCING OPERATION STANDARD TENDER Normal timeframe (Irish time) Tuesday 2.30 p.m. Tender announcement by ECB Wednesday 8.30 a.m. Deadline for Counterparty submission of bids a.m. Announcement of tender result by ECB a.m. Certification of individual allotment results by the Bank Thursday Settlement Submission of Bids Bids must be submitted for a minimum amount of 1,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of 10,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Bids must be submitted on the prescribed form (see reverse). Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) iii) iv) state the respective interest-rate quotations up to a maximum of ten (variable rate tender only); ensure that bids are a multiple of 0.01 percentage points (variable rate tenders); and ensure that they have a sufficient amount of eligible underlying assets to cover their tender bids (making allowance for the haircut). Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank ( ) or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new revised bid will only be accepted if it is received prior to the specified ECB deadline. The contractual arrangements in place allow the Eurosystem to impose penalties if a counterparty is not able to transfer a sufficient amount of underlying assets to settle the amount of liquidity it has been allotted in a tender operation. 238

241 The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids higher than the marginal interest rate are satisfied in full at the marginal interest rate. In a multiple rate variable rate tender, bids higher than the marginal interest rate are also satisfied in full but at the actual rates tendered.

242 EUROSYSTEM LONGER-TERM REFINANCING OPERATION COUNTERPARTY BID SUBMISSION STANDARD TENDER 1 Insert the name of your organisation and the reference number of the tender operation you want to participate in (to be found in the Eurosystem tender announcement). 2 In a fixed rate tender enter only the total amount bid. 3 In a variable rate tender, enter your bids in the list, filling in the amount bid (expressed in millions) and the interest-rate quotation with a maximum of two decimals. Counterparty Name: Bank A Tender Ref. No.: No. Amount Interest rate 1 5,000, % 2 20,000, % 3 75,000, % 100,000,000 Total amount bid Minimum Maximum 4 Fill in the total bid amount submitted by your organisation. 5 For variable rate tenders, fill in the minimum and the maximum interest-rate bid. 240

243 EUROSYSTEM LONGER-TERM REFINANCING OPERATION COUNTERPARTY BID SUBMISSION STANDARD TENDER Counterparty Name: Tender Ref. No.: No. Amount Interest rate Total amount bid Minimum Maximum Authorised Signature

244 BIDDING PROCEDURE FOR EUROSYSTEM STRUCTURAL OPERATION STANDARD TENDER Normal timeframe (Irish time) T p.m. Tender announcement by ECB T 8.30 a.m. Deadline for Counterparty submission of bids a.m. Announcement of tender result by ECB a.m. Certification of individual allotment results by the Bank T+1 Settlement * Structural operations are not executed according to any pre-specified calendar Submission of Bids Bids must be submitted for a minimum amount of 1,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of 100,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Bids must be submitted on the prescribed form (see reverse). Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) iii) iv) state the respective interest-rate quotations, up to maximum of ten (variable rate tender only); ensure that bids are a multiple of 0.01 percentage points (variable rate tenders); and ensure that they have a sufficient amount of eligible underlying assets to cover their tender bids (making allowance for the haircut). Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank ( ) or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new revised bid will only be accepted if it is received prior to the specified ECB deadline.. The contractual arrangements in place allow the Eurosystem to impose penalties if a counterparty is not able to transfer a sufficient amount of underlying assets to settle the amount of liquidity it has been allotted in a tender operation. 242

245 The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids higher than the marginal interest rate are satisfied in full at the marginal interest rate. In a multiple rate variable rate tender, bids higher than the marginal interest rate are also satisfied in full but at the actual rates tendered.

246 EUROSYSTEM STRUCTURAL OPERATION COUNTERPARTY BID SUBMISSION STANDARD TENDER 1 Insert the name of your organisation and the reference number of the tender operation you want to participate in (to be found in the Eurosystem tender announcement). 2 In a fixed rate tender enter only the total amount bid. 3 In a variable rate tender, enter your bids in the list, filling in the amount bid (expressed in millions) and the interest-rate quotation with a maximum of two decimals. Counterparty Name: Bank A Tender Ref. No.: No. Amount Interest rate 1 5,000, % 2 20,000, % 3 75,000, % 100,000,000 Total amount bid Minimum Maximum 4 Fill in the total bid amount submitted by your organisation. 5 For variable rate tenders, fill in the minimum and the maximum interest-rate bid. 244

247 EUROSYSTEM STRUCTURAL OPERATION COUNTERPARTY BID SUBMISSION STANDARD TENDER Counterparty Name: Tender Ref. No.: No. Amount Interest rate Total amount bid Minimum Maximum Authorised Signature

248 BIDDING PROCEDURE FOR EUROSYSTEM FINE-TUNING OPERATION REPO QUICK TENDER Timeframe Minutes 0 Tender Announcement from the ECB +25 (25) Deadline for Counterparty submission of bids +35 (60) Announcement of tender result by ECB +10 (70) Certification of individual allotment results by the Bank Settlement Same day Eligibility (Refer to Chapter 2.1.) Submission of Bids Bids must be submitted for a minimum amount of 1,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of 100,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Bids must be submitted on the prescribed form (see reverse). Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) iii) iv) state the respective interest-rate quotations, up to maximum of ten (variable rate tender only); ensure that bids are a multiple of 0.01 percentage points (variable rate tenders); and ensure that they have a sufficient amount of eligible underlying assets to cover their tender bids (making allowance for the haircut). Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank ( ) or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new revised bid will only be accepted if it is received prior to the specified ECB deadline. The contractual arrangements in place allow the Eurosystem to impose penalties if a counterparty is not able to transfer a sufficient amount of underlying assets to settle the amount of liquidity it has been allotted in a tender operation. 246

249 The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids higher than the marginal interest rate are satisfied in full at the marginal interest rate. In a multiple rate variable rate tender, bids higher than the marginal interest rate are also satisfied in full but at the actual rates tendered.

250 EUROSYSTEM FINE-TUNING OPERATION COUNTERPARTY BID SUBMISSION REPOS QUICK TENDER 1 Insert the name of your organisation and the reference number of the tender operation you want to participate in (to be found in the Eurosystem tender announcement). 2 In a fixed rate tender enter only the total amount bid. 3 In a variable rate tender, enter your bids in the list, filling in the amount bid (expressed in millions) and the interest-rate quotation with a maximum of two decimals. Counterparty Name: Bank A Tender Ref. No.: No. Amount (x 1,000,000) Interest rate 1 5,000, % 2 20,000, % 3 75,000, % 100,000,000 Total amount bid Minimum 3.07% Maximum 3.10% 4 Fill in the total bid amount submitted by your organisation. 5 For variable rate tenders, fill in the minimum and the maximum interest-rate bid. 248

251 EUROSYSTEM FINE-TUNING OPERATION COUNTERPARTY BID SUBMISSION QUICK TENDER Counterparty Name: Tender Ref. No.: No. Amount Interest rate Total amount bid Minimum Maximum Authorised Signature

252 SETTLEMENT PROCEDURES FOR THE MOBILISATION OF COLLATERAL IN LIQUIDITY PROVIDING OPERATIONS (INCLUDING THE PROVISION OF INTRA-DAY CREDIT AND MARGINAL LENDING FACILITY) After successful participation in a tender operation, the counterparty should ensure that sufficient collateral, taking account of haircuts has been provided to the Bank. Any queries should be addressed to the Collateral Management Section, Payments & Securities Settlements Division of the Bank: Telephone Nos.: ( ) ; ; and Fax No: ( ) assigncollateral@centralbank.ie. 1. Irish Government Bonds and Paper issued by the NTMA 116 ; Euro Market or Global Issues issued into Euroclear Bank SA/NV, and Securities issued in other (I)CSDs where there is an ECB-approved eligible link: Delivery of such securities to be used as collateral for transactions with the Bank should be effected on a free-of-payment basis to an individual account operated by the Bank in respect of each counterparty within Euroclear Bank SA/NV. The Bank will pass on safekeeping fees incurred from Euroclear Bank SA/NV in respect of the account to the counterparty. Instructions concerning delivery of collateral must be sent to the Bank in advance of the transfer. The appropriate account number in Euroclear Bank SA/NV, which is required for settlement instructions to transfer securities to the Bank on a free-of-payment basis, must be obtained from the Bank. Since the deadline for input of instructions to Euroclear Bank SA/NV for same day settlement of securities transfers in real-time is 16:30, the counterparty must instruct the Bank in good time in respect of collateral which it intends to use for same day settlement. A list of ECB approved eligible links can be found on the ECB website ( Counterparties should note, however, that the deadlines, which apply to transfers using eligible links (i.e., if it is an external trade in Euroclear Bank SA/NV and not an internal trade) are the local market deadlines and not the Euroclear Bank SA/NV deadlines. In addition, the Bank will pass on the settlement fee levied by Euroclear Bank SA/NV for such transactions to counterparties. 2. When using Mortgage-Backed Promissory Notes: In order to use Mortgage-Backed Promissory Notes as collateral, counterparties must have entered into the framework agreement in respect of mortgage-backed promissory notes with the Bank. Each Mortgage-Backed Promissory Note is held by the Bank in trust for the counterparty until the Bank receives an instruction by fax/ from the counterparty in the 116 Also applicable to eligible EIB and HFA stocks. 250

253 form of an Authorisation to complete same. A Mortgage-Backed Promissory Note will become effective upon completion by the Bank in accordance with the terms of the relevant Authorisation. 3. When using Securities via the CCBM 117 The counterparty should arrange to transfer the agreed collateral on the settlement date into the account of the central bank of the country of location of the collateral. Counterparties are advised to refer to the following link on the ECB s website to familiarise themselves of the processes involved When using Domestic Credit Claims A credit claim of the Bank s counterparty where the credit claim agreement is governed by Irish law is deemed to be a domestic credit claim. Any counterparty that wishes to use domestic credit claims must have executed the framework agreement in respect of Eurosystem operations secured over collateral pool assets) with the Bank. In addition, it must have obtained confirmation of eligibility of the credit claim from the Financial Markets Division of the Bank (i.e., credit claim identifier numbers must have been assigned by the Bank). A counterparty will also be required to advise the Financial Markets Division of any updates to eligible credit claims, in particular, early, partial or total repayments, downgrades and any material change in the conditions of the credit claim (including any changes which result in an increase in the nominal amount outstanding). Furthermore, in the case of credit claims reaching their maturity date, the counterparty must advise the Bank at least 1 full business day before the maturity date as such claims will not be eligible for use as collateral on their maturity date. Each individual eligible credit claim will be valued by the Bank, at the time of initial delivery and thereafter, immediately after any update, by applying the appropriate haircut to the nominal value outstanding of each claim, thereby arriving at an overall net value of all credit claims provided by the counterparty. The Bank will, therefore, operate a pooling system for all domestic credit claims. Following the valuation of the credit claims by the Bank, the Bank will provide details of the net value to the counterparty. (Notwithstanding this, it is up to the counterparty to ensure that they maintain the correct valuation for the domestic credit claims which they have mobilised with the Bank, using the appropriate haircuts.) When a counterparty wishes to use domestic credit claims as collateral against a monetary policy operation, they should do so on the standard form for this purpose (See Attachment A). It is important to note that the amount to be recorded in this case must be the net value from the current valuation of all of their domestic credit claims and not the nominal amount outstanding. 117 For detailed information about CCBM, seehttp://

254 5. When using Cross-Border Credit Claims A credit claim of the Bank s counterparty where the credit claim agreement is governed by the law of a euro area country other than Ireland is deemed to be a cross border credit claim. Counterparties must have entered into the framework agreement in respect of Eurosystem operations secured over collateral pool assets to use these credit claims as collateral. In addition, such credit claims must be mobilised via the CCBM in accordance with the procedures of the National Central Bank (NCB) whose law governs the credit claim agreement(see Annex 8). This NCB will act as Correspondent Central Bank (CCB) in this case. Counterparties must, therefore, contact the relevant NCB in order to obtain eligibility for these credit claims the NCB in this case will have responsibility for assigning the credit claim identifier number. Counterparties will also be required to comply with the procedures of this NCB with regard to the information required in order to determine eligibility of the credit claim. Counterparties are advised to refer to the following link on the ECB s website to familiarise themselves of the processes involved. Following confirmation of eligibility by the relevant NCB to the counterparty, cross border credit claims are mobilised in the normal way via the CCBM procedures (see section below on Delivery/Release of Collateral). Any updates to the eligible credit claim, in terms of early, partial or total repayments, downgrades and material conditions of the credit claim must be provided, by the counterparty, to this NCB also. In addition, any update, which results in an increase in the amount outstanding, must also be reported to the Bank in accordance with the procedures for delivery/release of collateral. Furthermore, if a counterparty no longer wishes a credit claim to be used as collateral, they must advise the Bank of the release of the credit claim in accordance with the procedures for delivery/release of collateral (see section below on Delivery/Release of Collateral). It should be noted that partial repayments of the credit claim, which reduce the amount of the claim outstanding, are not processed as a release of collateral and will be handled by the Bank in the same way as a partial redemption of a security (i.e., the Bank will be advised of the amount of the repayment by the NCB who is acting as CCB and will reduce the amount of the credit claim accordingly; Counterparties should be aware that this may result in a margin call). Credit claims which are reaching their maturity date must be released by the counterparty at least 1 full business day before the maturity date as such claims will not be eligible for use as collateral on their maturity date. 6. Delivery/Release of Collateral (i) Delivery/release of the following asset classes: Marketable assets held in the Bank s accounts in Euroclear Bank SA/NV; Marketable assets mobilised via the CCBM; 252

255 Cross border credit claims (where an update of the credit claim by the counterparty results in an increase in the amount outstanding this represents an additional delivery of that credit claim or where a counterparty no longer wishes to use a credit claim as collateral this represents a release of a credit claim and must be for the full amount outstanding at the time of the request to release.) SWIFT The Bank operates a straight through processing system in respect of the delivery/release of the asset classes described above. In this regard, instructions should be sent to the Bank via SWIFT by Counterparties who are members and sub-members of SWIFT. All instructions to the Bank in respect of the delivery/release of collateral must contain the following information: delivery/settlement date; trade date; ISIN code (ORN (i.e., credit claim identifier number) in the case of cross border credit claims); Debtor identifier number in the case of cross border credit claims; denomination of currency; Safekeeping A/C quantity of securities (if in units, unit amount must be specified); BIC code of instructing party; name and BIC code of delivery/receiving agent; and BIC code of place of settlement. SWIFT instructions in respect of the transfer of assets have a standard format. However, market practices in some countries require specific inputs in certain input fields. These exceptions are detailed in Attachment D. Instructions from counterparties for the release of assets, which are received by the Bank in advance of the settlement date, will be released by the Bank no later than the opening time for CCBM operations (i.e., 08:00) on the settlement date, provided that such assets are not required to collateralise outstanding credit operations. If this is the case, the assets will be released as soon as the counterparty has substituted adequate collateral or repaid the relevant operation, whichever is applicable. In the event of settlement problems regarding securities transfers counterparties will receive a SWIFT Message Type MT548 Settlement Status & Allegements from the Bank which will provide details of the nature of the settlement problem. The SWIFT MT548 messages will provide counterparties with: a) the TRN of the instruction affected, b) the status of the instruction, and c) the reason for the settlement problem.

256 Upon receipt of an MT548 counterparties might be required to submit a cancel request (e.g., if the original instruction was incorrect). This request for cancellation must be sent to the Bank by close of business on the day the incorrect instruction was sent. In the case of security transfers via the CCBM, if the cancel request is not transmitted it is possible that the security transfer may be delayed as the national central bank to/from which the securities are being delivered/released on the Bank s behalf may not process the correct instruction until the cancel request for the incorrect instruction is received. Manual Instructions In the case of those counterparties who are not members/sub-members of SWIFT the Bank will accept instructions for the delivery/release of collateral by fax. It should be noted, however, that the use of fax instructions will increase the time taken to process the delivery/release of collateral. Accordingly to ensure the successful completion of securities transactions the following deadlines must be adhered to: In the case of Irish Government bonds and paper issued by the NTMA and also Euro Market or Global Issues issued into Euroclear Bank SA/NV, the counterparty should instruct the Bank a) by 15:30 of the security it intends to transfer for same day settlement, and b) 16:30 of the security it intends to transfer for overnight settlement. In the case of securities mobilised via the CCBM, the counterparty should instruct the Bank by 14:00 of the security it intends to transfer for same day settlement with the following exception: the deadline for securities being transferred to/from Banco de España via Clearstream Banking Luxembourg or Euroclear Bank SA/NV for same day settlement is 11:30, while the deadline for overnight settlement is 15:00. These deadlines do not relate to the processing of high volumes of instructions which should be transmitted to the Bank in advance of these times. In addition, it is also advisable to contact the Bank by telephone to confirm receipt of fax instructions (see contact details above). Fax instructions in respect of the delivery of collateral must be in the format set out in Attachment B. The same procedures apply to release of collateral as to delivery of the collateral. The format detailed at Attachment C should be used in relation to fax instructions for the release of collateral. All instructions to the Bank in respect of the delivery/release of collateral must contain the following information: 254 delivery/settlement date; trade date; ISIN code (ORN (i.e., credit claim identifier number) in the case of cross border credit claims); Debtor identifier number in the case of cross border credit claims;

257 denomination of currency; Safekeeping A/C quantity of securities (if in units, unit amount must be specified); BIC code of instructing party; name and BIC code of delivery/receiving agent; and BIC code of place of settlement. Instructions in respect of securities transfers have a standard format. However, market practices in some countries require specific inputs in certain input fields. These exceptions are detailed in Attachment D. (ii) Delivery/release of the following asset classes: Mortgage-Backed Promissory Notes When a counterparty wishes to mobilise Mortgage-Backed Promissory Notes, they instruct the Bank by fax/ (in accordance with the procedures set out in the relevant Framework Agreement ) authorising the Bank to complete a Mortgage-Backed Promissory Note. The Bank automatically cancels any Mortgage-Backed Promissory Notes upon the repayment by the counterparty of the proceeds of the relevant operation for which they were used as collateral. (iii) Delivery/release of the following asset classes: Domestic credit claims Deliveries and releases of domestic credit claims will be processed by the Bank on foot of any updates provided by the counterparty to the Financial Markets Division. Therefore: in the case of a partial repayment of a credit claim; an increase in the nominal amount outstanding in respect of a credit claim; or in cases where a counterparty no longer wishes to provide a credit claim as collateral to the Bank; there is no requirement for the counterparty to provide any specific notification (other than the normal update file for reporting changes) to the Bank. The changes in the value of the credit claims will have been processed as part of the overall valuation of credit claims and will result in an increase/decrease in the overall net value of credit claims provided, as appropriate. 8. Settlement of operations It should be noted that, under no circumstances, will cash be advanced to the counterparty by the Bank prior to the settlement date (or will the intraday credit line in TARGET2-Ireland be decreased, if applicable) prior to there being sufficient collateral in the counterparty s collateral pool to cover the outstanding credit operations. Substitution of eligible assets for those originally used as collateral for a transaction is permitted at the discretion of the Bank and subject to the terms of the Master Substitution

258 Agreement executed between the Bank and the counterparty (see Chapter 9). The substitute assets must be transferred by the counterparty before the original assets are returned to the counterparty. In the period prior to maturity of the transaction, the Bank will value collateral on a daily basis to ensure that adequate collateral is in place to cover the value of all outstanding credit operations entered into by a counterparty. Should the value of collateral not be sufficient following a daily valuation, the Bank will request the counterparty to increase the quantity of collateral placed with the Bank to cover the outstanding credit in full. The Bank uses a discretionary trigger point (this is currently 0.5% of the amount of liquidity provided by the Bank to the counterparty) in order to reduce the number and amount of such margin calls. The same procedure as outlined above, under Delivery/Release of Collateral, should be followed for transfer of the additional collateral. Similarly, collateral will be returned by the Bank, on request, if the value of the collateral increases beyond the agreed trigger point. Requests for transfers of collateral should be made before 11:00 in order to allow the actual transfer to be effected by 16:00. Requests made after this time will be processed on a best efforts basis but will normally be effected on the following business day. In the event that a counterparty is using an asset that becomes ineligible or may no longer be used due to close links with the issuer/guarantor, the counterparty is obliged to immediately notify the Bank thereof. In addition, the counterparty has to remove the asset at the earliest possible date. When an asset becomes ineligible, the Bank will revalue the asset at zero at the next valuation date. If such a revaluation leads to undercollateralisation, the Bank will make a margin call. Counterparties should be aware that collateral is valued everyday (including Irish bank and public holidays) with the exception of weekends and TARGET2 holidays. Accordingly, as margin calls cannot be predicted in advance it is important that counterparties have staff available to provide additional collateral in the event that one takes place. On the maturity date, the Bank will debit the counterparty s TARGET2-Ireland account and increase the intraday credit line in TARGET2-IRELAND with the maturity proceeds of the relevant operation (for non-target2 participants, the counterparty must have arranged that sufficient funds are in their account with their TARGET2 correspondent so that the Bank can debit their correspondent s account). In the event that a counterparty has a transaction (or more than one transaction) which is maturing and has entered into another transaction (or more than one transaction) with the Bank which has the same settlement date as the maturing transaction(s), the Bank will arrange to settle these transactions on a net basis with a correspondent impact on their intraday credit line in TARGET2-Ireland, if applicable. If the Bank issues a Confirmation of a Relevant Eurosystem Operation by a SWIFT message type MT 320, such Confirmation shall be interpreted in accordance with the following: 256

259 the "Related Reference" specified at F21 is the reference of the Relevant Eurosystem Operation; the "Value Date" specified at F30V is the settlement date of the Relevant Eurosystem Operation; the "Currency and Principal Amount" at F32B are the Liquidity Provided Amount of the Relevant Eurosystem Operation and the currency of denomination thereof; the "Interest Amount" specified at F34E is an indicative amount, only, calculated on the basis that the interest rate applicable to the Relevant Eurosystem Operation is at all times during the term thereof the "Interest Rate" specified at F37G. If, at any time during that term, the applicable interest rate differs from the "Interest Rate" specified at F37G, the Interest Amount is subject to adjustment accordingly; and where the interest rate applicable to the Relevant Eurosystem Operation may change during the term of the Relevant Eurosystem Operation, the "Interest Rate" specified at F37G is the rate determined, as of the Trade Date, in accordance with the formula or other means of determining the interest rate applicable to the Relevant Eurosystem Operation (it being acknowledged that interest accrues in respect of that Relevant Eurosystem Operation only with effect from its settlement date). The applicable interest rate at any time during that term shall be calculated in accordance with the terms of the Relevant Eurosystem Operation, and subject to the terms of the Relevant Eurosystem Operation including, without limitation, any thereof that afford to the Counterparty the right to designate an Optional Early Maturity Date, or agree with the Bank a Substitution Early Maturity Date, in respect of all or part of the Liquidity Provided Amount in respect thereof. Terms used in this Section have the meanings given to them in the Bank's form of Framework Agreement in respect of Eurosystem Operations secured over Collateral Pool Assets, a template version of which is set out in Chapter 9.

260 ATTACHMENT A CCBM market practices In principle, the use of the CCBM does not require counterparties to adopt special procedures beyond arranging the transfer of the securities in a different country. But counterparties should be aware that market practices in other countries may be different because different types of collateralisation techniques (repos, assignments, pledges and floating charges) and different methods of holding collateral (pooled and earmarked collateral systems) are used in the EU. Moreover, securities settlement systems (SSSs) in the EU have different operating procedures that the counterparty must take into account when transferring collateral held in a different country. See below link to the ECB website for an overview of information related to the CCBM in each country. This information is not intended to be exhaustive, and should be read together with the publication CCBM - procedures for Eurosystem counterparties (on the right-hand side of the screen on the below link)

261 ATTACHMENT B DELIVERY OF COLLATERAL FROM A COUNTERPARTY TO THE CENTRAL BANK OF IRELAND Name of Counterparty: MESSAGE TYPE: MT 540 RECEIVE FREE SEND TO: TAG FIELD NAME DATA FORMAT/CONTENTS Sequence A: General Information M 16R Start of Block GENL M 20C Sender s Reference SEME/ M 23G Function of Message Subsequence A1: Linkages M 16R Start of Block LINK M 20C Related Reference M 16S End of Block LINK M 16S End of Block GENL Sequence B: Trade Details M 16R Start of Block TRADDET M 98a Delivery Date SETT/ M 98a Trade Date TRAD/ M 35B ISIN Code ISIN Subsequence B1: Financial Instrument Attributes M 16R Start of Block FIA M 11A Currency DENO/ M 16S End of Block FIA M 16S End of Block TRADDET Sequence C: Financial Instrument/Account M 16R Start of Block FIAC M 36B Quantity of Securities SETT//FAMT/ M 97a Safekeeping Account SAFE/ M 16S End of Block FIAC Sequence E: Settlement Details M 16R Start of Block SETDET M 22F Indicator SETR/REPU Subsequence E1: Settlement Parties M 16R Start of Block SETPRTY M 95P BIC Code of Instructing Party SELL/ M 16S End of Block SETPRTY M 16R Start of Block SETPRTY M 95P/R BIC Code of Delivery Agent DEAG/ M 16S End of Block SETPRTY M 16R Start of Block SETPRTY M 95P BIC Code of Place of Settlement PSET/ M 16S End of Block SETPRTY M 16S End of Block SETDET Authorised Signature:..

262 ATTACHMENT C RELEASE OF COLLATERAL FROM CENTRAL BANK OF IRELAND TO A COUNTERPARTY Name of Counterparty: MESSAGE TYPE: MT 542 DELIVER FREE SEND TO: TAG FIELD NAME DATA FORMAT/CONTENTS Sequence A: General Information M 16R Start of Block GENL M 20C Sender s Reference SEME/ M 23G Function of Message Subsequence A1: Linkages M 16R Start of Block LINK M 20C Related Reference M 16S End of Block LINK M 16S End of Block GENL Sequence B: Trade Details M 16R Start of Block TRADDET M 98a Delivery Date SETT/ M 98a Trade Date TRAD/ M 35B ISIN Code ISIN Subsequence B1: Financial Instrument Attributes M 16R Start of Block FIA M 11A Currency DENO/ M 16S End of Block FIA M 16S End of Block TRADDET Sequence C: Financial Instrument/Account M 16R Start of Block FIAC M 36B Quantity of Securities SETT//FAMT/ M 97a Safekeeping Account SAFE/ M 16S End of Block FIAC Sequence E: Settlement Details M 16R Start of Block SETDET M 22F Indicator SETR/REPU Subsequence E1: Settlement Parties M 16R Start of Block SETPRTY M 95P BIC Code of Instructing Party BUYR/ M 16S End of Block SETPRTY M 16R Start of Block SETPRTY M 95P/R BIC Code of Delivery Agent REAG// M 16S End of Block SETPRTY M 16R Start of Block SETPRTY M 95P BIC Code of Place of Settlement PSET/ M 16S End of Block SETPRTY M 16S End of Block SETDET Authorised Signature:. 260

263 ATTACHMENT D EXCEPTIONS DUE TO MARKET PRACTICES SWIFT INSTRUCTIONS MT540/MT542 AUSTRIA To settle fixed income securities in the AT market the Common List of Data Elements needs to be used, plus: 1) The client of the delivering or receiving agent is to be specified with their BIC if possible. 2) When Euroclear Bank SA/NV or Clearstream International are involved in the settlement chain, the relevant issuer code should be used in the Repetitive Mandatory Subsequence E 1 - field 95 R, for example: DEAG/CEDE/xxxxx for trades via Clearstream International DEAG/ECLR/xxxxx for trades via Euroclear Bank SA/NV BELGIUM NBB CLEARING The delivering or receiving agent is to be specified with their local clearing code NBBE +participant number. EUROCLEAR BANK SA/NV To settle fixed income securities in Euroclear Bank SA/NV the Common List of Data Elements needs to be used, plus: 1. The Delivering agent is to be specified with its Euroclear Bank SA/NV code. The Receiving agent is to be specified with its Clearstream Banking or Euroclear Bank SA/NV code. 2 For internal settlement the place of settlement (PSET) needs to be specified: When instructing Euroclear Bank SA/NV for settlement with other Euroclear Bank SA/NV participant: PSET = MGTCBEBEECL (BIC for Euroclear Bank SA/NV). 3 For bridge settlement when instructing Euroclear Bank SA/NV to deliver to Clearstream Banking participant: PSET is CEDELULL (BIC for Clearstream Banking) and Clearstream Banking participant is REAG. 4. The Client of the DEAG/REAG is to be specified with a BIC whenever possible.

264 5. When indicating deliver/receiving agents in the Repetitive Mandatory Subsequence E1 - field 95 option R and the relevant issuer code must be used according to the examples below: DEAG/ECLR/XXXXX REAG/CEDE/XXXXX when instructing Euroclear Bank SA/NV to deliver to Cleastream Banking participant 5. Delivering or receiving custodians should be identified with their account number in a field 97A:SAFE//9XXX. FRANCE 1. Delivering or receiving custodians should be identified with their BIC. The custodians account number in EB or CBL has to be mentioned in a field 97A: SAFE// Custodian account number in CBL or EB. 2. The account number of EB or CBL in Euroclear Bank SA/NV France (EF) should be mentioned in a field 95R: REAG or DEAG/SICV/Account number of EB or CBL in EF. When the Banque de France is acting as CCB, it will not accept instructions with a trade date that is more than 35 business days from the settlement date of collateral. Euroclear Bank SA/NV GERMANY 1) The client of the Delivering or Receiving Agent is to be specified with their BIC. The client account number in Euroclear Bank SA/NV or CBL has to be mentioned in a field 97A:SAFE// client account number in CBL or Euroclear Bank SA/NV. 2) When Euroclear Bank SA/NV or Clearstream Luxembourg are involved in the settlement chain, the issuer code of Clearstream Banking Frankfurt should be used in the Repetitive Mandatory Subsequence E1 - field 95R: according to the examples below: 262

265 Involvement of Euroclear Bank SA/NV: 95 P: SELL//XXXXXXXX (BIC of counterparty) 97a::SAFE//nnnnn (account no. in Euroclear Bank SA/NV) 95 R: DEAG/DAKV/7204 (7204 is the account no. of Euroclear Bank SA/NV in Clearstream Banking Frankfurt ) 95 P: PSET//DAKVDEFFDOM Involvement of Clearstream Banking Luxembourg (CBL): 95 P: SELL//XXXXXXXX (BIC of counterparty) 97a::SAFE//nnnnn (account no. in CBL) 95 R: DEAG/DAKV/7201 (7201 is the account no. of CBL in Clearstream Banking Frankfurt) 95 P: PSET//DAKVDEFFDOM Both Euroclear Bank SA/NV and Clearstream Luxembourg are direct participants in Clearstream Banking Frankfurt. They act as REAG/DEAG with their respective Clearstream Banking Frankfurt account number. Euroclear Bank SA/NV Bank: 7204 Clearstream Banking Luxembourg: 7201 Involvement of Clearstream Banking Frankfurt (CBF): 95 P: SELL//XXXXXXXX (BIC of counterparty) 95 R: DEAG/DAKV/nnnn (account no. in CBF) 95 P: PSET//DAKVDEFFDOM LUXEMBOURG CLEARSTREAM BANKING To settle fixed income securities in Clearstream Banking the Common List of Data Elements needs to be used, plus: 1. The Delivering agent is to be specified with its Clearstream Banking code. The Receiving agent is to be specified with its Clearstream Banking or Euroclear Bank SA/NV code. 2. For internal settlement the place of settlement (PSET) needs to be specified: When instructing Clearstream Banking for settlement with other Clearstream Banking participant: PSET = CEDELULL (BIC for Clearstream Banking Luxembourg). 3. For bridge settlement when instructing Clearstream Banking to deliver to Euroclear Bank SA/NV participant: PSET is MGTCBEBEECL (BIC for Euroclear Bank SA/NV) and Euroclear Bank SA/NV participant is REAG.

266 4. The Client of the DEAG/REAG is to be specified with a BIC whenever possible. 5. When indicating deliver/receiving agents in the Repetitive Mandatory Subsequence E1 - field 95 option R and the relevant issuer code must be used: DEAG/CEDE/XXXXX for trades in Clearstream Luxembourg. 6. Delivering or receiving custodians should be identified with their account number in a field 97A:SAFE//9XXX. LUXCSD The Delivering or Receiving agent is to be specified with its Clearstream Banking code: DEAG/CEDE/XXXXX VP LUXEMBOURG The Delivering or Receiving agent is to be specified with its VP participant ID: DEAG/VPDK/XXXXX 118 THE NETHERLANDS To settle in the NL market the Common List of Data Elements needs to be used, plus: 1. The presence of the full settlement chain is highly recommended. A minimum of two levels is required. 2. The Dutch CSD (Euroclear Bank SA/NV NL) uses the account number of the Client of the Receiving Agent as matching criterion to avoid cross matching. The account number must be provided without leading zeroes and without any punctuation characters. Euroclear Bank SA/NV NL uses the first 16 characters of the account as a mandatory matching criterion to avoid cross matching. As this is the safekeeping account with the Receiving Agent this is always known at the receiving end. 3. Receiving / Delivering Agent (REAG/DEAG) 1. The Receiving or Delivering Agent is the Euroclear Bank SA/NV Group Single Platform (EGSP) code (95R::REAG or DEAG/EGSP/12!n). The EGSP code format has 12 numeric characters. Leading zeros are required to make up the 12 numeric characters. DNB will add leading zero s to ENL instructions in case HCB instructions are short of 12 numeric DEAG/REAG numbers. 118 VP codes in five positions (Participants IDs) are published on under CSD Services/Clearing and Settlement/Securities dealers. 264

267 ICSDs, Euroclear Bank SA/NV Bank Brussels and Clearstream Bank Luxembourg are direct participants in Euroclear Bank SA/NV Nederland. They act as REAG/DEAG with their respective Euroclear Bank SA/NV Nederland participant codes. Euroclear Bank SA/NV Bank: Clearstream Bank: The account number of the Euroclear Bank SA/NV Bank or Clearstream Bank participant should be mentioned in the account number with SELL/BUYR Example: Settlement chain for a delivery in favour of a Euroclear Bank SA/NV Bank account :16R:SETPRTY :95P::BUYR//BIC :97A::SAFE//94960 :16S:SETPRTY :16R:SETPRTY :95R::REAG/EGSP/ :16S:SETPRTY :16R:SETPRTY :95P::PSET//NECINL2A :16S:SETPRTY GREECE 1. The Delivering or Receiving agent must be a Greek Financial Institution - participant of the Greek SSS (BOGS) - identified by their BIC. 2. When Euroclear Bank SA/NV or Clearstream International are involved in the settlement chain, one more repetition of Subsequence E1 are required, mentioning the data source scheme and the account of the instructing party. Example : 95R::DECU/ECLR/12345 (or RECU/ECLR/12345) SPAIN To settle fixed income securities in the Spanish market the Common List of Data Elements needs to be used, plus: 1. The Delivering or Receiving agent is to be specified with its BIC 2. When Clearstream Frankfurt is involved: The client of the delivering or receiving agent is to be specified with their BIC. The client account number in Clearstream Frankfurt has to be

268 mentioned in a field 97A:SAFE// client account number in that CSD, according to the following example: 95 P: BUYR//XXXXXXXX (BIC of counterparty) 97A: SAFE//nnnnnnnn (account no. of counterparty in Clearstream Banking Frankfurt) 95 P: REAG//DAKVDEFF 95 P: PSET//IBRCESMM Euroclear Bank SA/NV SLOVAKIA Slovak CSD is using the Delivering or Receiving agent as a matching criterion. Specifics for pledges: For the pledge technique each NCB is registered in CDCP as pledgee and is assigned its own identification and registration code. Information about registration and the identification code is available for members of CDCP acting as delivery agents on It is not necessary to open an account for an NCB, as securities are blocked on the account of the counterparty (account number starts with 90.. or 97..) that must be opened in CDCP registration. Each counterparty is allowed to use only one pledge number for the total amount of collateral pledged in favour of the HCB. SLOVENIA 1) Specificities for different collateralisation techniques PLEDGE For the pledge collateralisation technique, each NCB is registered in KDD as pledgee and is assigned its own identification code (so-called KID code, or KDD ID). When Banka Slovenija is in CCB role, it provides HCB with this KID code (upon HCB request). Before the first mobilization takes place, the HCB has to have the KID code. 266

269 REPO Banka Slovenija, when requested by the HCB, opens a securities account in KDD in the name of the HCB (so-called client account119), where assets (delivered by HCB's counterparties) are held. Before the first mobilization takes place, the HCB has to have the account opened in KDD. 2) Banka Slovenije will use the client s account number with the Delivering or Receiving agent as a matching criterion. The delivering or receiving agent is to be specified with its KDD member code, which should be followed by the client s account number with the delivering or receiving agent. Both codes should be separated by X. Example of delivery to the KDD: 95P: SELL//XXXXXXXX (BIC of the counterparty) 95R: DEAG/KDDS/15c1!a9n 95P: PSET//KDDSSI22 (BIC of the place of settlement) Where 15c represents a maximum 15-character member code of the delivering or receiving agent and 9n is a maximum 9-digit client account number with the delivering or receiving agent. Due to the clear separation of both codes, it is always necessary to include the alphabetical capital letter X (as 1!a). For all Cross-Border Credit Claims 95 P: SELL//COUNTERPARTY BIC 95 P: DEAG//COUNTERPARTY BIC 95 P: PSET//BIC CODE OF THE CCB 119 SI is a direct holding country, therefore cannot consolidate assets on one omnibus account.

270 The BIC code of the counterparty is used for both SELL and DEAG in SWIFT MT540/542 for the cross-border mobilisation of credit claims. The place of settlement is the BIC of the correspondent central bank. 268

271 SETTLEMENT PROCEDURES FOR THE MOBILISATION OF COLLATERAL IN LIQUIDITY ABSORBING OPERATIONS The Bank will notify counterparties of settlement procedures in the event of the mobilisation of collateral in liquidity absorbing operations.

272 BIDDING PROCEDURE FOR EUROSYSTEM FINE-TUNING OPERATION FX SWAPS QUICK TENDER Timeframe Minutes 0 Tender announcement by ECB +25 (25) Deadline for Counterparty submission of bids +35 (60) Announcement of tender result by ECB +10 (70) Certification of individual allotment results by the Bank Settlement Same day Eligibility (Refer to Chapter 2.1.) Submission of Bids Bids must be submitted for a minimum amount of 1,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of 100,000. The minimum bid amount is applied to each individual swap point level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Bids must be submitted on the prescribed form (see reverse). Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) iii) state the respective swap point quotations, up to maximum of ten (variable rate tender only); and ensure that bids are a multiple of 0.01 swap points (variable rate tenders). Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank [Nos. ( ) ] or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. 270

273 Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new corrected bid will only be accepted if it is received prior to the specified ECB deadline and any acceptance of revised bids received after the specified ECB deadline will be at the discretion of the Bank. The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids higher (provision)/lower (absorption) than the marginal swap point are satisfied in full at the marginal swap point. In a multiple rate variable rate tender, bids higher (provision)/lower (absorption) than the marginal swap point are also satisfied in full but at the actual points tendered.

274 EUROSYSTEM FINE TUNING OPERATION COUNTERPARTY BID SUBMISSION FX SWAPS QUICK TENDER 1 Insert the name of your organisation and the reference number of the tender operation you want to participate in (to be found in the Eurosystem tender announcement). 2 In a fixed rate tender enter only the total amount bid in the fixed currency. 3 In a variable rate tender, enter your bids in the list, filling in the amount bid (expressed in millions) and the swap point quotation with a maximum of six decimals. Counterparty Name: Bank A Tender Ref. No.: No. Fixed-currency amount Swap point 1 5,000, ,000, ,000, ,000,000 Total amount bid Minimum Maximum Fill in the total bid amount submitted by your organisation. 5 For variable rate tenders, fill in the minimum and the maximum interest-rate bid. 272

275 EUROSYSTEM FINE-TUNING OPERATION COUNTERPARTY BID SUBMISSION FX SWAPS QUICK TENDER Counterparty Name: Tender Ref. No.: No. Fixed currency Amount (x 1,000,000) Swap point Total amount bid Minimum Maximum Authorised Signature

276 SETTLEMENT PROCEDURES FOR COUNTERPARTIES IN RESPECT OF FX SWAPS On agreement of an FX Swap deal with the Bank, the Counterparty should issue a confirmation to Foreign Settlements Section of Payments and Securities Settlement Division of the Bank. In respect of liquidity providing swaps, the counterparty should arrange to transfer the agreed foreign currency amount to the Bank s correspondent on the settlement date in accordance with details agreed when the deal was initiated. Following receipt of this foreign currency amount, the Bank will pay the equivalent euro amount to the counterparty s TARGET2 account or the account of the counterparty s correspondent. On the maturity date, the counterparty should arrange to transfer the euro consideration to the Bank through TARGET2 or via a participant in TARGET2 in accordance with details agreed when the deal was initiated. Following receipt of this euro amount, the Bank will pay the foreign currency proceeds to the counterparty s correspondent. In respect of liquidity absorbing swaps, the counterparty should arrange to transfer the agreed euro amount to the Bank through TARGET2 or via a participant in TARGET2 on the settlement date in accordance with details agreed when the deal was initiated. Following receipt of this euro amount, the Bank will pay the foreign currency proceeds to the counterparty s correspondent. On the maturity date, the counterparty should arrange to transfer the foreign currency consideration to the Bank s correspondent in accordance with details agreed when the deal was initiated. Following receipt of this foreign currency amount, the Bank will pay the equivalent euro amount to the counterparty s TARGET2 account or the account of the counterparty s correspondent. If on any date amounts would otherwise be payable under these terms and conditions in the same currency by each party to the other, then the sums due from one party shall be set off against the sums due to the other and only the net balance shall be payable by the party required to pay the larger amount to the other party and the payment of the net balance shall satisfy and discharge the obligations to make payments of all such amounts. 274

277 BIDDING PROCEDURE FOR EUROSYSTEM FINE-TUNING OPERATION FIXED-TERM DEPOSITS QUICK TENDER Timeframe Minutes 0 Tender announcement by ECB +25 (25) Deadline for Counterparty submission of bids +35 (60) Announcement of tender result by ECB +10 (70) Certification of individual allotment results by the Bank Settlement Same day Eligibility (Refer to Section 2.1.) Submission of Bids Bids must be submitted for a minimum amount of 1,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of 100,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. Bids must be submitted on the prescribed form (see reverse). Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) iii) state the respective interest-rate quotations, up to maximum of ten (variable rate tender only); and ensure that bids are a multiple of 0.01 percentage points (variable rate tenders). Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank ( ) or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new corrected bid will only be accepted if it is received prior to the specified ECB deadline and any acceptance of revised bids received after the specified ECB deadline will be at the discretion of the Bank.

278 The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids lower than the marginal interest rate are satisfied in full at the marginal interest rate. In a multiple rate variable rate tender, bids lower than the marginal interest rate are also satisfied in full but at the actual rates tendered. 276

279 EUROSYSTEM FINE TUNING OPERATION COUNTERPARTY BID SUBMISSION FIXED-TERM DEPOSITS QUICK TENDER 1 Insert the name of your organisation and the reference number of the tender operation you want to participate in (to be found in the Eurosystem tender announcement). 2 In a fixed rate tender enter only the total amount bid. 3 In a variable rate tender, enter your bids in the list, filling in the amount bid (expressed in millions) and the interest-rate quotation with a maximum of two decimals. Counterparty Name: Bank A Tender Ref. No.: No. Amount Interest rate 1 5,000, % 2 20,000, % 3 75,000, % 100,000,000 Total amount bid Minimum 3.07% Maximum 3.10% 4 Fill in the total bid amount submitted by your organisation. 5 For variable rate tenders, fill in the minimum and the maximum interest-rate bid.

280 EUROSYSTEM FINE-TUNING OPERATION COUNTERPARTY BID SUBMISSION FIXED-TERM DEPOSITS QUICK TENDER Counterparty Name: Tender Ref. No.: No Amount Interest Rate Total amount bid Maximum Minimum Authorised Signature 278

281 SETTLEMENT PROCEDURES FOR COUNTERPARTIES IN RESPECT OF FIXED-TERM DEPOSITS On arrangement of a fixed-term deposit with the Bank, the counterparty should forward a confirmation of the transaction to the Eurosettlements Section of the Payments & Securities Settlements Division of the Bank on the next business day. On the settlement date the counterparty should arrange to transfer the agreed euro amount to the Bank through TARGET2. The cash consideration (plus accrued interest) will be transferred by the Bank to the counterparty on the maturity date for the deposit before 11:00 (local time).

282 BIDDING PROCEDURE FOR EUROSYSTEM USD Operations QUICK TENDER Timeframe Minutes 0 Tender announcement by ECB +35 (35) Deadline for Counterparty submission of bids +75 (110) Announcement of tender result by ECB +30 (140) Certification of individual allotment results by the Bank Settlement Next day Eligibility (Refer to Section 2.1.) Submission of Bids Bids must be submitted for a minimum amount of $5,000,000. Bids exceeding the minimum bid amount must be expressed as multiples of $100,000. The minimum bid amount is applied to each individual interest rate level. The ECB may impose a maximum bid limit in order to prevent disproportionately large bids. * Bids must be submitted on the prescribed form (see reverse). * Bids must be submitted by , with a scanned copy of the prescribed bidding form signed by an authorised official attached to the . In the event that the system is not functioning counterparties should fax bids to the relevant fax numbers provided. * When bidding, Counterparties must: i) state the amount of money that they are willing to transact; ii) state the respective interest-rate quotations. * Counterparties must confirm details of their bid by telephone to the Market Operations Desk in the Bank ( ) or in a contingency situation to the relevant phone numbers provided to counterparties and not later than the tender bid submission deadline. * Bids submitted after the deadline as specified in the ECB message are deemed to be invalid. * In addition, the Bank may discard bids which are: i) incomplete; and/or ii) not submitted on the prescribed form. Should this arise the Bank will notify the counterparty when the counterparty rings to confirm its bid. A new corrected bid will only be accepted if it is received prior to the specified ECB deadline and any acceptance of revised bids received after the specified ECB deadline will be at the discretion of the Bank. The ECB reserves the right to take any action it deems appropriate in order to correct an error in the tender announcement, including cancelling or interrupting a tender under execution. 280

283 If the tender result contains erroneous information with respect to any of the above, the ECB reserves the right to take any action it deems appropriate to correct such erroneous information. Certification of Individual Results The Bank will certify the individual allotment results by telephone to all institutions which are successful in the tender. Note: Variable Rate Tender In a single rate variable rate tender, bids lower than the marginal interest rate are satisfied in full at the marginal interest rate. In a multiple rate variable rate tender, bids lower than the marginal interest rate are also satisfied in full but at the actual rates tendered.

284 EUROSYSTEM USD OPERATION USD PROVISION COUNTERPARTY BID SUBMISSION NON STANDARD TENDER Counterparty Name: Tender Ref. No.: USD Amount Rate Authorised Signature 282

285 SETTLEMENT PROCEDURES FOR COUNTERPARTIES IN RESPECT OF EUROSYSTEM USD OPERATIONS After successful participation in a tender operation, the counterparty should ensure that sufficient collateral, taking account of haircuts has been provided to the Bank as detailed above. The counterparty should also confirm the US dollar settlement amount with the Foreign Settlements Section of the Payments & Securities Settlements Division of the Bank. Counterparty is receiving funds. On the settlement date provided that sufficient collateral is in the counterparty s collateral pool, the Bank will pay the US dollar funds to the counterparty s US correspondent. Counterparty is repaying funds. The counterparty should ensure that the maturity US dollar proceeds are repaid to the Bank s account at the Federal Reserve Bank of New York before CET in order to comply with the terms of the operation published on the ECB s website ( On receipt of the US dollar maturity proceeds, the Bank will release collateral as applicable. Market counterparties are advised that if US dollar funds are repaid after CET, the return of euro-denominated collateral cannot be guaranteed on the same day. If on any date amounts would otherwise be payable under these terms and conditions in the same currency by each party to the other, then the sums due from one party shall be set off against the sums due to the other and only the net balance shall be payable by the party required to pay the larger amount to the other party and the payment of the net balance shall satisfy and discharge the obligations to make payments of all such amounts.

286 PROCEDURE FOR BILATERAL OPERATIONS Bilateral operations through direct contact with counterparties can be applied for reverse transactions 120, outright transactions 121, foreign-exchange swaps and the collection of fixedterm deposits. Bilateral operations are normally not announced publicly in advance. In addition the ECB may decide not to announce the results of bilateral operations publicly. The ECB will provide the Bank with precise instructions. The Bank will contact by telephone those counterparties selected to participate in the operation. On completing a deal with a counterparty, the Bank will confirm the details by telephone. 120 Liquidity providing or liquidity absorbing. 121 For outright transactions, no restrictions are placed a priori on the range of Counterparties and deals may be effected through the Irish Stock Exchange or through the primary dealer system. 284

287 PROCEDURES FOR COUNTERPARTIES IN RESPECT OF OUTRIGHT TRANSACTIONS On arrangement of an outright transaction with the Bank, the counterparty should forward a confirmation of the transaction to the Payments & Securities Settlements Division of the Bank. Where securities are being sold to the Bank, the counterparty should arrange to have the agreed securities transferred if possible on a Delivery versus Payment basis into the Bank s account in the relevant Central Securities Depository on the settlement date in accordance with details agreed when the deal was initiated. If Delivery versus Payment is not possible, the securities concerned must be transferred into the Bank s name prior to release of the euro consideration to the counterparty by the Bank. Where securities are being purchased from the Bank, the counterparty should arrange to transfer the agreed euro consideration to the Bank s account in the relevant Central Securities Depository on the settlement date in accordance with details agreed when the deal was initiated, if possible on a Delivery versus Payment basis. If Delivery versus Payment is not possible, the euro consideration must be paid to the Bank prior to a Free-of-Payment release instruction being issued by the Bank to the appropriate Central Securities Depository in respect of the securities concerned. Where a counterparty only partly satisfies delivery of collateral obligations, the operation will be settled to the extent of that part delivery.

288 PROCEDURES FOR COUNTERPARTIES IN RESPECT OF STANDING FACILITIES Marginal Lending Facility Counterparties may use the marginal lending facility to obtain overnight liquidity from the Bank at a pre-specified interest rate against the provision of eligible assets (see Chapter 5). The facility is intended to satisfy counterparties temporary liquidity needs. The terms and conditions of the facility are identical throughout the euro area. The Bank will provide liquidity under the marginal lending facility in the form of overnightcollateralised loans. The provisions for the relevant agreements relating to the use of the marginal lending facility are set out in Chapter 9. Institutions fulfilling the general counterparty eligibility criteria specified in Chapter 2 may access the marginal lending facility. Access to the marginal lending facility is granted only on Irish business days. If at the end of the business day (17:00) a participant has used all or part of their intraday credit line in TARGET2-Ireland they can apply for a marginal lending facility (up to 17.15) or the system will automatically grant a marginal lending facility up to the amount of the credit line used. A request by a counterparty for a drawing under the Marginal Lending Facility may be made to the Euro Settlements section of the Payments & Securities Settlements Division of the Central Bank of Ireland by SWIFT message (MT299) to be received by (17:30 in the case of the last business day of the minimum reserve maintenance period). No cash limit is placed on the facility to be provided to counterparties although provision of the consideration is subject to the provision to the Bank of adequate collateral taking account of appropriate margins and haircuts. Notifications in respect of each drawing under the Marginal Lending Facility are sent by the Payment Module (PM) or the Home Accounting Module (HAM) (settlement notification on an optional basis). For the automatic marginal lending only PM account will be used since intraday credit is not provided in the HAM. Apart from the requirement to present sufficient underlying eligible assets, no limit is specified as to the amount of funds that can be advanced under the marginal lending facility. The maturity of credit extended under the marginal lending facility is overnight. Credit is to be repaid at the opening of TARGET2-Ireland and the securities settlement systems (SSSs) on the following Irish business day. The interest rate is announced in advance by the Bank and is calculated as a simple interest rate with the day-count convention of actual/360. The ECB may change the interest rate at any time, with effect not earlier than the following Eurosystem 122 As a general rule, the closing time for TARGET2-Ireland is 17:00. The deadline for requesting access to the marginal lending facility is postponed by an additional 15 minutes on the last Eurosystem Business Day of a reserve maintenance period. TARGET2-Ireland closing days are announced on the Bank s website or on the ECB s website 286

289 Business Day. 123 Interest under the marginal lending facility is payable with the repayment of the credit. Access to the marginal lending facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time. Deposit Facility Counterparties can use the deposit facility to make overnight deposits with the Bank. The deposits are remunerated at a pre-specified interest rate. The terms and conditions of the deposit facility are identical throughout the euro area. The overnight deposits accepted from counterparties are remunerated at a fixed rate of interest. No collateral is given to counterparties in exchange for the deposits. Institutions fulfilling the general counterparty eligibility criteria specified in Chapter 2 may access the deposit facility. Access to the deposit facility is granted only on Irish business days. Direct Participants and Home Accounting Module (HAM) account holders may access the overnight deposit facility directly via the Information & Control Module (ICM). HAM account holders who do not have access to the ICM may send a request to the Bank at any time up to 17:00 (17:15 in the case of the last Irish business day of the minimum reserve maintenance period). The amount that a counterparty may deposit under the facility is limited to the amount in their end-of-day RTGS/HAM account. The maturity of deposits under the facility is overnight. Deposits held under the facility mature at the opening of TARGET2-Ireland on the following Irish business day and will be repaid at that stage. The interest rate is announced in advance by the Bank and is calculated as a simple interest rate with the day-count convention of actual/360. The ECB may change the interest rate at any time, with effect not earlier than the following Eurosystem Business Day. Interest on the deposits is payable on maturity of the deposit. Access to the facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time. 123 Decisions on interest rate changes are taken by the Governing Council. These decisions are normally made when it assesses the monetary policy stance (at its first meeting of the month) and become effective only from the beginning of the new reserve maintenance period.

290 PROCEDURES IN RESPECT OF MINIMUM RESERVE REQUIREMENT ACCOUNTS All credit institutions operating in Ireland (other than credit unions) are required to submit a minimum reserve calculation based on their balance sheet data as at the last working day of each month 124. All credit unions are required to submit a minimum reserve calculation quarterly relating to end-march, end-june, end-september and end-december balance sheet data. Details of the monthly calculation are contained in the Resident Offices Return for monthly reporters and in the Prudential Return Guidance Notes for credit unions. This calculation, which must be submitted to the Bank (Statistics Division) by the tenth working day after month-end for monthly reporters, determines an institution s reserve requirement for the next maintenance period. Credit unions must submit their calculation when they submit their Prudential Return to the Registrar of Credit unions. This is due to be submitted by the 21st day of the month after the quarter end. All credit institutions are entitled to change the data used to calculate their minimum reserve requirement up to the freezing date, which is two business days before the start of the relevant maintenance period (see calendar on Statistics Section of the Bank s website ( for maintenance period dates and freezing dates). Each reporting institution is responsible for ensuring that its reserve requirement is correctly calculated and that the relevant individuals within the settlement and treasury area of the organisation are informed of the new required deposit in advance of the commencement of the next maintenance period. The onus for ensuring that the reserve requirement is met each period lies with the reporting institution. Where an institution fails to comply with all or part of the reserve requirement, the ECB may, in accordance with the Council Regulation (EC) concerning the application of minimum reserves, impose sanctions. 125 It should be noted that a credit institution s end-of-day balance on its reserve requirement account at close of business on the last day of the maintenance period is included in the calculation of its average daily holdings over the period. Credit institutions are not contacted by the Bank on the first day of a new maintenance period regarding their new minimum reserve requirement as this information will be available within an institution well in advance of the start of the new period. The operational arrangements relating to minimum reserve requirement accounts and the procedures to be followed by institutions lodging/withdrawing funds from their minimum reserve requirement account are as follows: 124 Credit Unions reserve requirements are changed on a quarterly basis. 125 Refer to Chapter 8, Section 8.6 for comprehensive details on the imposition of sanctions in the event of non-compliance with minimum reserve obligations. 288

291 Institutions which are Direct Participants in TARGET2-Ireland - Operational Arrangements Direct TARGET2-Ireland participants maintain an account within the Payments Module (PM) of the Single Shared Platform (SSP). The PM account is also their minimum reserve requirement account. Any credit balance on the PM/ minimum reserve requirement account at the end of the day (after completion of any Marginal Lending Facility or Overnight Deposit transactions) is used to meet the compulsory minimum reserve requirements. Consequently, any credit or debit to the PM/minimum reserve requirement account during the day affects the balance available at the end of the day for minimum reserve requirement purposes. Institutions should be aware that the balance on this account is not monitored on a daily basis by the Bank and it is each institution s responsibility to manage the balance on its account to ensure its minimum reserve requirement is satisfied. The Reserve Management Module (RM) provides Reserve Requirement holders that avail of the possibility to have online real-time access, via the Information and Control Module (ICM) with the following information: The amount of their reserve requirement The balance at the end of the day and the running average to-date over the current maintenance period The balance necessary over the remainder of the maintenance period to fulfil their compulsory reserve requirement Statement A statement of transactions on the PM/minimum reserve requirement account showing the end of day balance is available by either SWIFT MT950 or SWIFT MT940 to the account holder on a daily basis at the close of the RTGS system. This facility is optional and if required by institutions it must be requested via the appropriate static data registration form. Institutions that do not hold a PM account on the SSP may maintain their minimum reserve requirement via a Home Accounting Module (HAM) account. Institutions can top-up or drawdown their Minimum Reserve balances in the HAM. Top-ups of such accounts are affected via a TARGET2 direct participant. Drawdowns may be carried out by the Bank only on behalf of those institutions that use a Bank Identifier Code (BIC), which is not connected to the SWIFT network. Drawdowns can be made by HAM account holders themselves, via SWIFT Simplified MT 202. Alternatively, an institution can appoint a direct participant as co-manager of its HAM account which enables that participant to monitor the HAM account and to effect transfers into and out of the HAM account on its behalf.

292 1. The Simplified MT202 sent by a HAM account holder to debit their HAM account and to credit the funds to a direct PM participant must contain the following information: - Sender: BIC of HAM account holder - Receiver: TRGTXEHMXXX - Field 20: REF 1 - Field 21: REL REF - Field 32A: EUR Field 57A: IRCEIE2DAPS - Field 58A: BIC of direct PM participant - Field 72: /BNF/ BIC and IBAN of account to be credited. 2. NON-SWIFT BIC/BEI. Instructions for repayments from a HAM account must be received by the Euro Settlements Section of the Payments & Securities Settlements Division of the Bank by authorised fax before 14:00 hours on the day the change is to take effect. Faxed instructions must be sent to the following fax number: (01) Institutions, which issue a fax instruction, must provide the Bank, in advance, with a copy of authorised signatures of officers who can issue such an instruction. The Bank will not process a payment if the signature(s) on the fax does not comply with the signatures provided by the account holder. To ensure that adjustments are processed accurately and in a timely manner, the fax instruction must contain the following information: 1. Bank Identifier Code (BIC) of HAM account holder to be debited 2. Account number of HAM account to be debited 3. Reference of payment (optional) 4. Value date, currency code and amount 5. BIC of Direct PM participant to be credited 6. Field 72: /BNF/ BIC and IBAN of account to be credited No other information regarding the HAM account of the account holder is required in this instruction. The Bank will make the relevant payment to the nominated credit institution acting on behalf of the beneficiary by 17:00 hours. 290

293 Payment to a HAM Account Funds must be paid to the account holder s account by SWIFT payment Simplified MT202. The payment must be made by a direct participant in TARGET2. In the case of payments to a HAM account, it is not necessary for the account holder to notify the Bank in advance that it is making such a payment. The SWIFT Simplified MT202 must contain the following information: - Fin copy code: TGT - Sender: BIC of direct PM participant - Receiver: TRGTXEPMHAM - Field 20: REF - Field 21: REL REF - Field 32a: eur Field 58a: BIC of HAM account holder It is the responsibility of the account holder to ensure that funds are submitted in the correct format. Netting Netting of shortfalls/surpluses on an institution s HAM account in one maintenance period against the requirement for the following maintenance period is permitted. For example, in the event of an institution s minimum reserve requirement increasing from one maintenance period to the next, the institution may opt to lodge the additional sum to its HAM account which when added to the closing balance of the previous maintenance period equates to the new reserve requirement. Similarly, if an institution s minimum reserve requirement decreases, the institution may decide to withdraw the difference between its closing balance of the previous maintenance period and the new minimum reserve requirement. Institutions should be aware that they are responsible for ensuring that their minimum reserve requirements are met. All changes (including those on the renewal date for the requirement) must be initiated by the minimum reserve requirement account holder. The Bank will make no changes to the account unless instructions, as detailed above, are received from the account holder. Holdings of required reserves are remunerated at the average, taken over the maintenance period, of the ECB s rate (weighted according to the number of calendar days) on the main refinancing operations. Reserve holdings exceeding the required reserves are not remunerated. The remuneration is paid on the second Irish business day following the end of the maintenance period over which the remuneration was earned. Remuneration will be credited to the participants PM and HAM accounts on the SSP. Queries relating to either the calculation of a credit institution s minimum reserve requirement or the amount of its average minimum reserve holding during a maintenance period should be

294 directed to Financial Markets Division (Tel: ). Queries regarding settlement issues should be directed to Payments & Securities Settlement Division (Tel: /71/73). 292

295 ANNEX 2 GLOSSARY OF EUROSYSTEM TERMS Asset-backed securities (ABS): a debt instrument that is backed by a pool of ring fenced financial assets (fixed or revolving) that convert into cash within a finite time period. In addition, rights or other assets may exist that ensure the servicing or timely distribution of proceeds to the holders of the security. Generally, asset-backed securities are issued by a specially created investment vehicle which has acquired the pool of financial assets from the originator/seller. In this regard, payments on the asset-backed securities depend primarily on the cash flows generated by the assets in the underlying pool and other rights designed to assure timely payment, such as liquidity facilities, guarantees or other features generally known as credit enhancements. Actual/360: the day-count convention applied for the calculation of interest on a credit, implying that the interest is calculated over the actual number of calendar days over which the credit is extended, on the basis of a 360-day year. This day-count convention is applied in Eurosystem monetary policy operations. American auction: see multiple rate auction. Averaging provision: a provision allowing counterparties to fulfil their reserve requirements on the basis of their average reserve holdings over the maintenance period. The averaging provision contributes to the stabilisation of money market interest rates by giving institutions an incentive to smooth the effects of temporary liquidity fluctuations. The Eurosystem s minimum reserve system provides for averaging. Bilateral procedure: a procedure whereby the central bank deals directly with only one or a few counterparties, without making use of tender procedures. Bilateral procedures include operations executed through stock exchanges or market agents. Book-entry system: an accounting system that permits the transfer of securities and other financial assets without the physical movement of paper documents or certificates (e.g. the electronic transfer of securities). See also dematerialisation. Central securities depository (CSD): an entity which holds and administers securities or other financial assets, holds the issuance accounts, and enables transactions to be processed by book entry. Assets may exist either physically (but immobilised within the CSD) or in a dematerialised form (i.e. only as electronic records). Close links: a situation in which the counterparty is linked to an issuer/debtor/guarantor of eligible assets by reason of the fact that: a) the counterparty owns directly, or indirectly through one or more other undertakings, 20% or more of the capital of the issuer/debtor/guarantor or (b) the issuer/debtor/guarantor owns directly, or indirectly through one or more other undertakings, 20% or more of the capital of the counterparty (c) a third party owns more than 20% of the capital of the counterparty and more than 20% of the capital of the issuer/debtor/guarantor, either directly or indirectly through one or more other undertakings.

296 Collateral pooling system: a central bank system for managing collateral, in which counterparties open a pool account to deposit assets collateralising their transactions with the central bank. In a pooling system, by contrast with an earmarking system, the underlying assets are not earmarked for individual transactions. Collection of fixed-term deposits: a monetary policy instrument that may be used by the Eurosystem for fine-tuning purposes, where the Eurosystem offers remuneration on counterparties fixed-term deposits on accounts with the national central banks in order to absorb liquidity from the market. Correspondent banking: an arrangement under which one credit institution provides payment and other services to another credit institution. Payments through correspondents are often executed through reciprocal accounts (nostro and loro accounts) to which standing credit lines may be attached. Correspondent banking services are primarily provided across international boundaries but are also known as agency relationships in some domestic contexts. A loro account is the term used by a correspondent to describe an account held on behalf of a foreign credit institution; the foreign credit institution would in turn regard this account as its nostro account. Correspondent central banking model (CCBM): a mechanism established by the Eurosystem with the aim of enabling counterparties to use underlying assets in a cross-border context. In the CCBM, national central banks act as custodians for one another. This means that each national central bank has a securities account in its securities administration for each of the other national central banks and the ECB. The CCBM is also available to counterparties of certain non-eurosystem national central banks. Counterparty: the opposite party in a financial transaction (e.g. any transaction with the central bank). Credit institution: a credit institution within the meaning of Articles 2 and 4(1) of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) 126, as implemented in national law, that is subject to supervision by a competent authority; or another credit institution within the meaning of Article 123(2) of the Treaty that is subject to supervision of a standard comparable to supervision by a competent national authority Cross-border settlement: a settlement which takes place in a country other than the country or countries in which one or both of the parties to the trade are located. Currency hedge transaction: an agreement entered into between the issuer and a hedge counterparty, pursuant to which a portion of the currency risk arising from the receipt of cash flows in non-euro currency is mitigated by swapping the cash flows for euro currency payments to be made by the hedge counterparty, including any guarantee by the hedge counterparty of those payments. 126 OJ L 177, , p

297 Custodian: an entity which undertakes the safekeeping and administration of securities and other financial assets on behalf of others. Day-count convention: the convention regulating the number of days included in the calculation of interest on credits. The Eurosystem applies the day-count convention actual/360 in its monetary policy operations. Default event: an event referred to in the Eurosystem credit assessment framework (ECAF) that is covered by the definition contained in the Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) and Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) (together referred to as the Capital Requirements Directive (CRD)). Thus, a default event occurs when (a) the credit institution considers that the obligor is unlikely to pay its credit obligations to the credit institution, the parent undertaking or any of its subsidiaries in full, without recourse by the credit institution to actions such as realising security (if held), and/or (b) the obligor is past due more than 90 days on any material credit obligation to the credit institution, the parent undertaking or any of its subsidiaries. Delivery-versus-payment or delivery-against-payment system: a mechanism in an exchangefor-value settlement system which ensures that the final transfer of assets (securities or other financial instruments) occurs if, and only if, the final transfer of another asset (or other assets) occurs. Dematerialisation: the elimination of physical certificates or documents of title which represent ownership of financial assets, so that the financial assets exist only as accounting records. Deposit facility: a standing facility of the Eurosystem which counterparties may use to make overnight deposits at a national central bank, which are remunerated at a pre-specified interest rate. Depository: an agent with the primary role of recording securities either physically or electronically and keeping records of the ownership of these securities. Deposits redeemable at notice: the instrument category consisting of deposits for which the holder has to respect a fixed period of notice before being able to withdraw the funds. In some cases, there is the possibility of withdrawing a certain fixed amount in a specific period or of earlier withdrawal subject to the payment of a penalty. Deposits with agreed maturity: the instrument category consisting mainly of time deposits with a given maturity which, depending on national practices, may be either unconvertible prior to maturity or convertible only subject to a penalty. This category also encompasses some non-marketable debt instruments, such as non-marketable (retail) certificates of deposit. Dutch auction: see single rate auction. Earmarking system: a system for central banks collateral management where liquidity is provided against assets earmarked for each individual transaction.

298 EEA (European Economic Area) countries: the EU Member States and Iceland, Liechtenstein and Norway. End-of-day: the time of the business day following closure of TARGET2 at which the payments processed in TARGET2 are finalised for the day. Euro area: the area encompassing the Member States in which a single monetary policy is conducted under the responsibility of the Governing Council of the ECB. European System of Central Banks (ESCB): the European Central Bank (ECB) and the national central banks of the EU Member States. It should be noted that the NCBs of the EU Member States whose currency is not the euro retain their powers in the field of monetary policy according to national law and are thus not involved in the conduct of the monetary policy of the Eurosystem. Eurosystem: the European Central Bank (ECB) and the national central banks of the Member States of the euro area. The decision-making bodies of the Eurosystem are the Governing Council and the Executive Board of the ECB. Eurosystem business day: any day on which the ECB and at least one national central bank are open for the purpose of conducting Eurosystem monetary policy operations. Eurosystem credit assessment framework (ECAF): the set of procedures, rules and techniques that ensures that the Eurosystem s requirement of high credit standards for all eligible assets is met. In the establishment of high credit standards, the Eurosystem differentiates between marketable and non-marketable assets. In the assessment of the credit standard of eligible assets, the Eurosystem takes into account credit assessment information from credit assessment systems belonging to one of four sources, namely external credit assessment institutions (ECAIs), NCBs in-house credit assessment systems (ICASs), counterparties internal ratings-based (IRB) systems or third-party providers rating tools (RTs). In addition, in the assessment of the credit standard, the Eurosystem takes into account institutional criteria and features that guarantee similar protection for the instrument holder such as guarantees. The Eurosystem s benchmark for establishing its minimum requirement for high credit standards (its credit quality threshold ) is defined in terms of a credit assessment of credit quality step 3 in the Eurosystem s harmonised rating scale. 127 The Eurosystem considers a PD over a one-year horizon of 0.40% as equivalent to a credit assessment of credit quality step 3, subject to regular review. External credit assessment institution (ECAI): a credit quality assessment source provided for in the Eurosystem credit assessment framework (ECAF) that comprises those institutions whose credit assessments may be used by credit institutions for the determination of risk 127 The Eurosystem s harmonised rating scale is published on the ECB s website at A credit quality step 3 credit assessment means a minimum long-term rating of BBB- by Fitch or Standard & Poor s, of Baa3 by Moody s, or of BBB by DBRS. 296

299 weight exposures according to the Capital Requirements Directive. These institutions are subject to a formal recognition and validation process by the national supervisors. Final transfer: an irrevocable and unconditional transfer which effects a discharge of the obligation to make the transfer. Fine-tuning operation: a non-regular open market operation executed by the Eurosystem mainly in order to deal with unexpected liquidity fluctuations in the market. Fixed rate instrument: a financial instrument for which the coupon is fixed throughout the life of the instrument. Fixed rate tender: a tender procedure where the interest rate is specified in advance by the central bank and participating counterparties bid the amount of money they want to transact at the fixed interest rate. Floating rate instrument: a financial instrument for which the coupon is periodically reset relative to a reference index to reflect changes in short or medium-term market interest rates. Floating rate instruments have either pre-fixed coupons or post-fixed coupons. Foreign exchange swap: the simultaneous spot purchase/sale and forward sale/purchase of one currency against another. The Eurosystem executes open market monetary policy operations in the form of foreign exchange swaps where the national central banks (or the ECB) buy (or sell) euro spot against a foreign currency and at the same time sell (or buy) it back in a forward transaction. Gross settlement system: a transfer system in which the settlement of funds or the transfer of securities occurs on an instruction-by-instruction basis. Haircut: see valuation haircut. In-house credit assessment system (ICAS): a credit quality assessment source provided for in the Eurosystem credit assessment framework (ECAF) that currently comprises the four credit assessment systems operated by the Deutsche Bundesbank, the Banco de España, the Banque de France and the Oesterreichische Nationalbank. Initial margin: a risk control measure that may be applied by the Eurosystem in reverse transactions, implying that the collateral required for a transaction is equal to the credit extended to the counterparty plus the value of the initial margin. Internal rating-based (IRB) system: a credit quality assessment source provided for in the Eurosystem credit assessment framework (ECAF) that comprises the internal systems of those counterparties whose credit assessments may be used by credit institutions for the determination of risk weight exposures according to the Capital Requirements Directive. These systems are subject to a formal recognition and validation process by the national supervisors. International Securities Identification Number (ISIN): an international identification code assigned to securities issued in financial markets.

300 Intraday credit: credit extended for a period of less than one business day. It may be extended by central banks to even out mismatches in payment settlements and can take the form of: (i) a collateralised overdraft. Inverse floating rate instrument: a structured note where the rate of interest paid to the holder of the note varies inversely with changes in a certain reference interest rate. Irish Business Days: Business days for monetary policy purposes are any days on which the Bank is open for the purpose of conducting Eurosystem monetary policy operations. This will be any day other than Saturdays, Sundays, New Year s Day, Good Friday, Easter Monday, 1 May, Christmas Day and 26 December and any other days as notified from time to time. Issuer: the entity which is obligated on a security or other financial instrument. Link between securities settlement systems: a link consists of all the procedures and arrangements which exist between two securities settlement systems (SSSs) for the transfer of securities between the two SSSs concerned through a book-entry process. Liquidity support in an ABS transaction: any structural feature that can be used to cover any temporary cash flow shortfalls that may occur during the lifetime of the transaction. Longer-term refinancing operation: a regular open market operation executed by the Eurosystem in the form of a reverse transaction. Longer-term refinancing operations are executed through monthly standard tenders and normally have a maturity of three months. Lump-sum allowance: a fixed amount which an institution deducts in the calculation of its reserve requirement within the minimum reserve framework of the Eurosystem. Main refinancing operation: a regular open market operation executed by the Eurosystem in the form of a reverse transaction. Main refinancing operations are conducted through weekly standard tenders and normally have a maturity of one week. Maintenance period: the period over which compliance with reserve requirements is calculated. The ECB publishes a calendar of the reserve maintenance periods at least three months before the start of each year. Maintenance periods begin on the settlement day of the first main refinancing operation following the meeting of the Governing Council at which the monthly assessment of the monetary policy stance is pre-scheduled. They normally end on the day preceding the similar settlement day in the following month. Under special circumstances, the published calendar may be amended, depending, among other things, on changes in the schedule of Governing Council meetings. Margin call: a procedure related to the application of variation margins, implying that if the value, as regularly measured, of the underlying assets falls below a certain level, the central bank requires counterparties to supply additional assets (or cash). Similarly, if the value of the underlying assets, following their revaluation, were to exceed the amount owed by the counterparties plus the variation margin, the counterparty may ask the central bank to return the excess assets (or cash) to the counterparty. 298

301 Marginal interest rate: the interest rate at which the total tender allotment is exhausted. Marginal lending facility: a standing facility of the Eurosystem which counterparties may use to receive overnight credit from a national central bank at a pre-specified interest rate against eligible assets. Marginal swap point quotation: the swap point quotation at which the total tender allotment is exhausted. Marking to market: see variation margin. Maturity bucket: a class of assets, the residual maturity of which is within a certain range of values, e.g. the three-to-five-year maturity bucket. Maturity date: the date on which a monetary policy operation expires. In the case of a repurchase agreement or swap, the maturity date corresponds to the repurchase date. Maximum bid limit: the limit on the largest acceptable bid from an individual counterparty in a tender operation. The Eurosystem may impose maximum bid limits in order to avoid disproportionately large bids from individual counterparties. Maximum bid rate: the upper limit to the interest rate at which counterparties may submit bids in variable rate tenders. Bids at a rate above the maximum bid rate announced by the ECB are discarded. Member State: as used in this document, an EU Member State whose currency is the euro. Minimum allotment amount: the lower limit of the amount to be allotted to individual counterparties in a tender operation. The Eurosystem may decide to allot a minimum amount to each counterparty in its tender operations. Minimum allotment ratio: the lower limit, expressed in percentage terms, of the ratio of bids at the marginal interest rate to be allotted in a tender operation. The Eurosystem may decide to apply a minimum allotment ratio in its tender operations. Minimum bid rate: the lower limit to the interest rates at which counterparties may submit bids in variable rate tenders. Monetary financial institution (MFI): one of a class of financial institutions which together form the money-issuing sector of the euro area. These include central banks, resident credit institutions, as defined in Community law, and all other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs and, for their own account (at least in economic terms), to grant credit and/or invest in securities. Multiple rate auction (American auction): an auction at which the allotment interest rate (or price/swap point) equals the interest rate offered in each individual bid. National central bank (NCB): as used in this document, a central bank of an EU Member State.

302 NCB business day: any day on which the national central bank of a specific Member State is open for the purpose of conducting Eurosystem monetary policy operations. In some Member States, branches of the national central bank may be closed on NCB business days owing to local or regional bank holidays. In such cases, the relevant national central bank is responsible for informing the counterparties in advance of the arrangements to be made for transactions involving those branches. Open market operation: an operation executed on the initiative of the central bank in the financial market. With regard to their aims, regularity and procedures, Eurosystem open market operations can be divided into four categories: main refinancing operations, longerterm refinancing operations, fine-tuning operations and structural operations. As for the instruments used, reverse transactions are the main open market instrument of the Eurosystem and can be employed in all four categories of operations. In addition, the issuance of debt certificates and outright transactions are available for structural operations, while foreign exchange swaps and the collection of fixed-term deposits are available for the conduct of fine-tuning operations. Outright transaction: a transaction whereby assets are bought or sold up to their maturity (spot or forward). Pooling system: see collateral pooling system. Post-fixed coupon: a coupon on floating rate instruments which is determined on the basis of the values taken by the reference index on a certain date (or dates) during the coupon accrual period. Pre-fixed coupon: a coupon on floating rate instruments which is determined on the basis of the values taken by the reference index on a certain date (or dates) before the start of the coupon accrual period. Purchase date: the date on which the sale of purchased assets by the seller to the buyer becomes effective. Purchase price: the price at which purchased assets are sold or are to be sold to the buyer by the seller. Quick tender: the tender procedure used by the Eurosystem for fine-tuning operations when it is deemed desirable to have a rapid impact on the liquidity situation in the market. Quick tenders are normally executed within a time frame of 90 minutes and are normally restricted to a limited set of counterparties. Rating tools (RTs): a credit quality assessment source provided for in the ECAF that is provided by those entities that assess the credit quality of debtors by using primarily quantitative models in a systematic and mechanical manner, relying among other information on audited accounts, and whose credit assessments are not intended for general public disclosure. These entities have to be individually accepted by the Eurosystem before becoming part of the ECAF. 300

303 Repo operation: a liquidity-providing reverse transaction based on a repurchase agreement. Repurchase agreement: an arrangement whereby an asset is sold while the seller simultaneously obtains the right and obligation to repurchase it at a specific price on a future date or on demand. Such an agreement is similar to collateralised borrowing, with the difference that ownership of the securities is not retained by the seller. The Eurosystem uses repurchase agreements with a fixed maturity in its reverse transactions. Repurchase date: the date on which the buyer is obliged to sell back assets to the seller in relation to a transaction under a repurchase agreement. Repurchase price: the price at which the buyer is obliged to sell back assets to the seller in relation to a transaction under a repurchase agreement. The repurchase price equals the sum of the purchase price and the price differential corresponding to the interest on the extended liquidity over the maturity of the operation. Reserve account: an account with the national central bank on which a counterparty s reserve holdings are maintained. The counterparties settlement accounts with the national central banks may be used as reserve accounts. Reserve base: the sum of the balance sheet items which constitute the basis for calculating the reserve requirement of a credit institution. Reserve holdings: counterparties holdings on their reserve accounts which serve to fulfil reserve requirements. Reserve ratio: the ratio defined by the central bank for each category of balance sheet items included in the reserve base. The ratios are used to calculate reserve requirements. Reserve requirement: the requirement for institutions to hold minimum reserves with the central bank. Within the minimum reserve framework of the Eurosystem, the reserve requirement of a credit institution is calculated by multiplying the reserve ratio for each category of items in the reserve base with the amount of those items on the institution s balance sheet. In addition, institutions deduct a lump-sum allowance from their reserve requirement. Residual maturity: the time remaining until the maturity date of a debt instrument. Reverse transaction: an operation whereby the national central bank buys or sells assets under a repurchase agreement or conducts credit operations against collateral. RTGS (real-time gross settlement) system: a settlement system in which processing and settlement take place on an order-by-order basis without netting continuously in real time. See also TARGET2. Safe custody account: a securities account managed by the central bank on which credit institutions can place securities deemed suitable to back central bank operations. Securities settlement system (SSS): a system which permits the holding and transfer of securities or other financial assets, either free of payment (FOP) or against payment (delivery versus payment).

304 Settlement account: an account held by a direct participant in TARGET2 with the central bank for the purpose of processing payments. Settlement agent: an institution which manages the settlement process (e.g. the determination of settlement positions, the monitoring of payment exchanges, etc.) for transfer systems or other arrangements requiring settlement. Settlement date: the date on which a transaction is settled. The settlement might take place on the same day as the trade (same-day settlement) or one or several days after the trade (the settlement date is specified as the trade date (T) + the settlement lag). Single rate auction (Dutch auction): an auction in which the allotment interest rate (or price/swap point) applied for all satisfied bids is equal to the marginal interest rate. Solvency risk: the risk of loss owing to the failure (bankruptcy) of an issuer of a financial asset or to the insolvency of the counterparty. Standard tender: a tender procedure used by the Eurosystem in its regular open market operations. Standard tenders are carried out within a time frame of 24 hours. All counterparties fulfilling the general eligibility criteria are entitled to submit bids in standard tenders. Standardised deduction: the fixed percentage of the amount outstanding of debt securities with an agreed maturity of up to two years (including money market paper) which can be deducted from the reserve base by the issuers which cannot present evidence that such outstanding amount is held by other institutions subject to the minimum reserve system of the Eurosystem, by the ECB or by a national central bank. Standing facility: a central bank facility available to counterparties at their own initiative. The Eurosystem offers two overnight standing facilities: the marginal lending facility and the deposit facility. Start date: the date on which the first leg of a monetary policy operation is settled. The start date corresponds to the purchase date for operations based on repurchase agreements and foreign exchange swaps. Strip (separate trading of interest and principal): a zero coupon bond created in order to trade separately the claims on particular cash flows of a security and the principal of the same instrument. Structural operation: an open market operation executed by the Eurosystem mainly in order to adjust the structural liquidity position of the financial sector vis-à-vis the Eurosystem. Swap point: the difference between the exchange rate of the forward transaction and the exchange rate of the spot transaction in a foreign exchange swap. TARGET: the predecessor of the TARGET2 system, operating in a decentralised structure linking together national RTGS systems and the ECB payment mechanism. The TARGET system 302

305 has been replaced by the TARGET2 system in accordance with the migration schedule specified in Article 13 of Guideline ECB/2007/2. TARGET2 (Trans-European Automated Real-time Gross settlement Express Transfer system): the real-time gross settlement system for the euro, providing settlement of payments in euro in central bank money. TARGET2 is established and functions on the basis of a single platform, through which all payment orders are submitted and processed and through which payments are received in the same technical manner. TARGET2 is legally structured as a multiplicity of RTGS systems (TARGET2 component systems). TARGET2-Ireland means the RTGS system of the that forms part of TARGET2; Tender procedure: a procedure in which the central bank provides liquidity to, or withdraws liquidity from, the market on the basis of bids submitted by counterparties in competition with each other. The most competitive bids are satisfied first until the total amount of liquidity to be provided or withdrawn by the central bank is exhausted. TPA: triparty agent Trade date (T): the date on which a trade (i.e. an agreement on a financial transaction between two counterparties) is struck. The trade date might coincide with the settlement date for the transaction (same-day settlement) or precede the settlement date by a specified number of business days (the settlement date is specified as T + the settlement lag). Treaty: the Treaty on the Functioning of the European Union Trigger point: a pre-specified level of the value of the liquidity provided at which a margin call is executed. Valuation date: the date on which the assets underlying credit operations are valued. Valuation haircut: a risk control measure applied to underlying assets used in reverse transactions, implying that the central bank calculates the value of underlying assets as the market value of the assets reduced by a certain percentage (haircut). The Eurosystem applies valuation haircuts reflecting features of the specific assets, such as the residual maturity. Valuation markdown: a risk control measure applied to underlying assets used in reverse transactions, meaning that the central bank applies a reduction of the theoretical market value of the assets by a certain percentage before applying any valuation haircut. Variable rate tender: a tender procedure whereby the counterparties bid both the amount of money they want to transact with the central bank and the interest rate at which they want to enter into the transaction. Variation margin (marking to market): a certain level of the market value of the underlying assets used in the Eurosystem s liquidity-providing reverse transactions that the Eurosystem requires to be maintained over time. This implies that if the value, measured on a regular basis, of the underlying assets falls below a certain level, the national central bank will require the counterparty to supply additional assets or cash (i.e. a margin call). Similarly, if the value of

306 the underlying assets, following their revaluation, exceeds a certain level, the counterparty may retrieve the excess assets or cash. Volume tender: see fixed rate tender. Zero coupon bond: a security paying only one cash flow during its life. For the purpose of this document, zero coupon bonds include securities issued at a discount and securities which deliver a single coupon at maturity. A strip is a special type of zero coupon bond. 304

307 ANNEX 3 EXAMPLES OF MONETARY POLICY OPERATIONS AND PROCEDURES List of examples Example 1 Example 2 Example 3 Example 4 Example 5 Example 6 Liquidity-providing reverse transaction by fixed rate tender Liquidity-providing reverse transaction by variable rate tender Issuance of ECB debt certificates by variable rate tender Liquidity-absorbing foreign exchange swap by variable rate tender Liquidity-providing foreign exchange swap by variable rate tender Risk control measures Example 1: Liquidity-providing reverse transaction by fixed rate tender The ECB decides to provide liquidity to the market by means of a reverse transaction organised with a fixed rate tender procedure. Three counterparties submit the following bids: Counterparty Bank 1 Bank 2 Bank 3 Bid (EUR millions) Total 140 The ECB decides to allot a total of 105 million. The percentage of allotment is: %

308 The allotment to the counterparties is: Counterparty Bid (EUR millions) Allotment (EUR millions) Bank 1 Bank 2 Bank Total Example 2: Liquidity-providing reverse transaction by variable rate tender The ECB decides to provide liquidity to the market by means of a reverse transaction organised with a variable rate tender procedure. Three counterparties submit the following bids: Amount (EUR millions) Interest rate (%) Bank 1 Bank 2 Bank 3 Total bids Cumulative bids Total The ECB decides to allot EUR 94 million, implying a marginal interest rate of 3.05%. All bids above 3.05% (for a cumulative amount of EUR 80 million) are fully satisfied. At 3.05% the percentage of allotment is: 306

309 % 35 The allotment to Bank 1 at the marginal interest rate is, for example: The total allotment to Bank 1 is: 0.4 x 10 = = 14 The allotment results can be summarised as follows: Amount (EUR millions) Counterparties Bank 1 Bank 2 Bank 3 Total Total bids Total allotment If the allotment procedure follows a single rate (Dutch) auction, the interest rate applied to the amounts allotted to the counterparties is 3.05%. If the allotment procedure follows a multiple rate (American) auction, no single interest rate is applied to the amounts allotted to the counterparties; for example, Bank 1 receives EUR 5 million at 3.07%, EUR 5 million at 3.06% and EUR 4 million at 3.05%.

310 Example 3: Issuance of ECB debt certificates by variable rate tender The ECB decides to absorb liquidity from the market by issuing debt certificates using a variable rate tender procedure. Three counterparties submit the following bids: Amount (EUR millions) Interest rate (%) Bank 1 Bank 2 Bank 3 Total Cumulative bids Total The ECB decides to allot a nominal amount of EUR million, implying a marginal interest rate of 3.05%. All bids below 3.05% (for a cumulative amount of EUR 65 million) are fully satisfied. At 3.05% the percentage of allotment is: % 70 The allotment to Bank 1 at the marginal interest rate is, for example: The total allotment to Bank 1 is: 0.85 x 20 = =

311 The allotment results can be summarised as follows: Amount (EUR millions) Counterparties Bank 1 Bank 2 Bank 3 Total Total bids Total allotment Example 4: Liquidity-absorbing foreign exchange swap by variable rate tender The ECB decides to absorb liquidity from the market by executing a foreign exchange swap on the EUR/USD rate by means of a variable rate tender procedure. (Note: The euro is traded at a premium in this example.) Three counterparties submit the following bids: Amount (EUR millions) Swap points (x 10,000) Bank 1 Bank 2 Bank 3 Total Cumulative bids Total The ECB decides to allot EUR 158 million, implying 6.63 marginal swap points. All bids above 6.63 (for a cumulative amount of EUR 65 million) are fully satisfied. At 6.63 the percentage of allotment is:

312 % 100 The allotment to Bank 1 at the marginal swap points is, for example: The total allotment to Bank 1 is: 0.93 x 25 = = The allotment results can be summarised as follows: Amount (EUR millions) Counterparties Bank 1 Bank 2 Bank 3 Total Total bids Total allotment The ECB fixes the spot EUR/USD exchange rate for the operation at If the allotment procedure follows a single rate (Dutch) auction, at the start date of the operation the Eurosystem buys EUR 158,000,000 and sells USD 178,540,000. On the maturity date of the operation, the Eurosystem sells EUR 158,000,000 and buys USD 178,644,754 (the forward exchange rate is = ). 310

313 Example 4 (continued) If the allotment procedure follows a multiple rate (American) auction, the Eurosystem exchanges the amounts of euro and US dollars as shown in the following table: Spot transaction Forward transaction Exchange rate Buy EUR Sell USD Exchange rate Sell EUR Buy USD ,000,000 11,300, ,000,000 11,306, ,000,000 16,950, ,000,000 16,960, ,000,000 16,950, ,000,000 16,960, ,000,000 28,250, ,000,000 28,266, ,000, ,090, ,000, ,151, Total 158,000, ,540, ,000, ,645,339

314 Example 5: Liquidity-providing foreign exchange swap by variable rate tender The ECB decides to provide liquidity to the market by executing a foreign exchange swap on the EUR/USD rate by means of a variable rate tender procedure. (Note: The euro is traded at a premium in this example.) Three counterparties submit the following bids: Amount (EUR millions) Swap points Bank 1 Bank 2 Bank 3 Total Cumulative bids (x 10,000) Total The ECB decides to allot EUR 197 million, implying 6.54 marginal swap points. All bids below 6.54 (for a cumulative amount of EUR 195 million) are fully satisfied. At 6.54 the percentage of allotment is: % 20 The allotment to Bank 1 at the marginal swap points is, for example: The total allotment to Bank 1 is: 0.10 x 5 = = 55.5 The allotment results can be summarised as follows: 312

315 Amount (EUR millions) Counterparties Bank 1 Bank 2 Bank 3 Total Total bids Total allotment The ECB fixes the spot EUR/USD exchange rate for the operation at If the allotment procedure follows a single rate (Dutch) auction, at the start date of the operation the Eurosystem sells EUR 197,000,000 and buys USD 222,610,000. At the maturity date of the operation, the Eurosystem buys EUR 197,000,000 and sells USD 222,738,838 (the forward exchange rate is = ). If the allotment procedure follows a multiple rate (American) auction, the Eurosystem exchanges the amounts of euro and US dollars as shown in the following table: Spot transaction Forward transaction Exchange rate Sell EUR Buy USD Exchange rate Buy EUR Sell USD ,000,000 11,300, ,000,000 11,306, ,000,000 11,300, ,000,000 11,306, ,000,000 22,600, ,000,000 22,612, ,000,000 45,200, ,000,000 45,225, ,000,000 90,400, ,000,000 90,451, ,000,000 39,550, ,000,000 39,572, ,000,000 2,260, ,000,000 2,261, Total 197,000, ,610, ,000, ,736,573

316 ANNEX 4 SELECTION OF COUNTERPARTIES FOR FOREIGN EXCHANGE INTERVENTION OPERATIONS AND TERMS AND CONDITIONS FOR FOREIGN EXCHANGE SWAPS FOR MONETARY POLICY PURPOSES The selection of counterparties for foreign exchange intervention operations and foreign exchange swaps for monetary policy purposes will follow a uniform approach irrespective of the chosen organisational set-up for the Eurosystem s external operations. The selection policy does not entail a substantial departure from existing market standards, as it has been derived from the harmonisation of the national central banks current best practices. The selection of counterparties to Eurosystem foreign exchange intervention operations is based, primarily, on two sets of criteria. The first set of criteria is inspired by the principle of prudence. A first prudential criterion is creditworthiness, which is assessed using a combination of different methods (e.g. using credit ratings available from commercial agencies and the in-house analysis of capital and other business ratios); a second criterion is that the Eurosystem requires all its potential foreign exchange intervention counterparties to be subject to supervision by a recognised supervisor; and, as a third criterion, all the Eurosystem s foreign exchange intervention counterparties need to follow high ethical standards and have a good reputation. Once the minimum prudence requirement is fulfilled, the second set of criteria inspired by efficiency considerations is applied. A first efficiency criterion relates to competitive pricing behaviour and the counterparty s ability to handle large volumes, even in turbulent market conditions. The quality and coverage of information provided by counterparties feature among other efficiency criteria. The pool of potential foreign exchange intervention counterparties is sufficiently large and diverse to guarantee the necessary flexibility when implementing intervention operations. It enables the Eurosystem to choose from among different intervention channels. In order to be able to intervene efficiently in different geographical locations and time zones, the Eurosystem can use counterparties in any international financial centre. However, in practice, a substantial share of the counterparties tend to be located in the euro area. For foreign exchange swaps executed for monetary policy purposes, the range of counterparties corresponds to the counterparties located in the euro area which are selected for Eurosystem foreign exchange intervention operations. The national central banks may apply limit-based systems in order to control credit exposures vis-à-vis individual counterparties in foreign exchange swaps conducted for monetary policy purposes. Terms and conditions applicable to foreign exchange swap operations for monetary policy purposes. 314

317 Nature of the Terms and Conditions The Bank will conduct foreign exchange swaps (as specified in Annex 1) under the following terms and conditions. In the context of monetary policy operations, the parties hereto may enter into transactions in which one party ( Party A ) agrees to exchange an amount of euro (the euro amount ) with the other party ( Party B ) against an amount agreed in another currency (the foreign currency ), with a simultaneous agreement to reverse the transaction at a specified future date. The two amounts in foreign currency shall, respectively, be determined by application of the spot rate and the forward rate to the euro amount. Each such transaction shall be referred to herein as a transaction and the parties shall be governed by the terms and conditions contained in this chapter and such other parts of this document as are relevant. Definitions Business days for monetary policy purposes are any days on which the Bank is open for the purpose of conducting Eurosystem monetary policy operations ( Irish Business Days ); this will be any day other than Saturdays, Sundays, New Year s Day, Good Friday, Easter Monday, 1 May, Christmas Day and 26 December and any other days as notified from time to time. Eurosystem Business Days are any days on which the ECB and at least one national central bank are open for the purpose of conducting Eurosystem monetary policy operations. Default rate means: i) in relation to an amount of euro, European Overnight Index Average (EONIA) and the Marginal Lending Rate, whichever is the higher plus 2 percentage points; and ii) in relation to an amount in any other currency, the per annum percentage rate equal to the cost to the Bank as certified by it without any requirement for proof or evidence of any actual cost of funding the relevant amount, plus 2 percentage points per annum, in each case on a 360-day basis, for the actual number of days during the relevant period. Foreign currency shall be any lawful currency other than the euro. Forward rate means, in relation to a specific transaction, the rate applied to convert the euro amount into such amount in the foreign currency as Party A shall be obliged to transfer to Party B at the re-transfer date (the re-transfer amount ) against payment of the euro amount and which rate shall be determined by reference to the spot rate construed according to the swap points as set out in the confirmation. Re-transfer date means with respect to any transaction the date (and where appropriate the time on that date) when Party B is to re-transfer the euro amount to Party A. Spot rate means in relation to a specific transaction, the rate applied to convert the euro amount into such amount in the foreign currency relevant for that transaction as Party B shall

318 be obliged to transfer to Party A at the transfer date (the transfer amount ) against payment of the euro amount and which rate shall be set out in the confirmation. Transfer date means with respect to any transaction, the date (and where appropriate the time on that date) when the transfer of the euro amount by Party A to Party B is to become effective, which for the avoidance of doubt shall be the date (and where appropriate the time on that date) when the parties agree settlement of a transfer of the euro amount shall occur. Initiation, Confirmation and Payment Arrangements A transaction may be entered into solely at the initiation of the Bank and through such formalities as may be specified from time to time in the terms and conditions contained in this chapter which shall include the delivery by both parties of a written (including electronic) confirmation of the transaction ( confirmations ) in the form and manner specified from time to time in these terms and conditions. The confirmations relating to a transaction shall, together with these terms and conditions, constitute evidence of the terms agreed between Party A and Party B for that transaction, unless objection is made promptly with respect to a confirmation after receipt thereof. In the event of any conflict between the confirmations and these terms and conditions, the confirmations shall prevail in respect of that transaction only. Confirmations constitute a supplement to and form part of these terms and conditions and shall be construed as one with them and shall form part of a single contractual arrangement. Payments shall be made on the due date and for value on that date in the place of the account specified in the relevant confirmations or otherwise pursuant to these terms and conditions, in freely transferable funds and in the manner customary for payments in the required currency. Each obligation of the Bank to pay any amount due under the clause above is subject to no event of default nor any of the facts set out in (a) to (p) below with respect to the counterparty having occurred which is continuing. Any obligation to make payments in a particular currency will not be discharged or satisfied by any tender in any other currency. A party that defaults in the payment of any amount due under these terms and conditions shall pay interest on such amount to the other party on demand in the same currency as the overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the default rate. Netting If on any date amounts would otherwise be payable under these terms and conditions in the same currency by each party to the other, then the sums due from one party shall be set off against the sums due to the other and only the net balance shall be payable by the party required to pay the larger amount to the other party and the payment of the net balance shall satisfy and discharge the obligations to make payments of all such amounts. 316

319 Event of Default If any, or any combination, of the events set out in (a) to (x) below occur in relation to the counterparty and, except in the case of an event which arises in relation to the counterparty and falls within sub-paragraphs (d) or (o) or (s) (in the case of (o), to the extent that it relates to sub-paragraphs (d)), the Bank serves written notice on the counterparty stating that such event shall be treated as an event of default for the purposes of these terms and conditions, an event of default shall be considered to have occurred: (a) any representation or warranty made or deemed to be made or repeated by the counterparty under this Documentation in the context of any specific operation or transaction or under any applicable law was or is incorrect in any material respect when made or deemed to be made or repeated; or (b) the counterparty defaults in the due and punctual performance of any of the other provisions of this Documentation or in the context of any specific operation or transaction and (if, in the Bank's determination, capable of remedy) fails to remedy such default within such period as the Bank may designate (not to exceed 10 days) after notice is given by the Bank requiring such default to be remedied and designating the time period for remedy thereof; or (c) the counterparty ceases or threatens to cease to carry on its business or any substantial part thereof; or (d) a decision is made by a competent judicial or other authority to implement in relation to the counterparty or any of its subsidiaries a procedure for the windingup of or the appointment of a liquidator or analogous officer over the counterparty or any such subsidiary as the case may be or any other analogous procedure; or (e) a decision is made by a competent judicial or other authority to implement a reorganisation measure or other analogous procedure intended to safeguard or restore the financial situation of, and to avoid the making of a decision of the kind referred to in (d) above in relation to, the counterparty or any of its subsidiaries; or (f) a petition is presented for the appointment of an examiner pursuant to Section 2 of the Companies (Amendment) Act, 1990, as amended, in relation to the counterparty or any of its subsidiaries or an examiner is appointed to the counterparty or any of its subsidiaries; or (g) a petition (not being a petition falling within (f) above or a procedural step falling within (j) below) is filed or presented in respect of the counterparty or any of its subsidiaries (other than by the Bank in respect of any obligation under this Documentation) in any court or before any agency alleging or for the bankruptcy, winding-up or other insolvency of the counterparty or any of its subsidiaries (or any analogous proceeding) or seeking any reorganisation, arrangement, composition, re-adjustment, liquidation, dissolution or similar relief (other than a solvent reconstruction, amalgamation or reorganisation to which the Bank has given its prior written consent) under any present or future statute, law or

320 regulation, such petition not having been stayed or dismissed within 30 days of its filing; or (h) there is appointed a receiver, trustee or analogous officer to the counterparty or any of its subsidiaries or over all or any material part of the property of the counterparty or of any of its subsidiaries, unless the Bank has given its prior written confirmation that the Bank will not serve notice of the occurrence of an event of default on the basis of such appointment; or (i) (j) a declaration by the counterparty or any of its subsidiaries in writing, of its inability to pay all or any of its debts or to meet its obligations, or a voluntary general agreement or arrangement entered into by the counterparty or any of its subsidiaries with its creditors, or the counterparty or any of its subsidiaries is, or is deemed to be, insolvent or is deemed to be unable to pay its debts; or procedural steps preliminary to any matter referred to in (d), (e), (f) or (h) above being taken; or (k) the counterparty or any of its subsidiaries has an authorisation to conduct activities under either Directive No. 2006/48/EC of the European Parliament and the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions, or Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC and repealing Council Directive 93/22/EEC) suspended or revoked; or (l) the counterparty or any of its subsidiaries is suspended or expelled from membership of any payment system or arrangement through which payments under monetary policy transactions are made or is suspended or expelled from membership of any securities settlement system used for the settlement of Eurosystem monetary policy transactions or any other securities exchange or association or other self-regulating organisation concerned with dealing in securities, or suspended or prohibited from dealing in securities by any government agency; or (m) measures such as are referred to in Section 5 of Title III of Directive No.2006/48/EC of the European Parliament and the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions are taken against the counterparty or any of its subsidiaries; or (n) an event of default occurs in relation to the counterparty or any of its subsidiaries including any branch of that counterparty or subsidiary as the case may be, under any agreement, arrangement or transaction entered into by it including any branch of it with any other members of the Eurosystem for the purpose of effecting monetary policy operations where any other member has exercised its right to close out under any such agreement, arrangement or transaction; or (o) any event analogous to any of the events at (d) to (j), inclusive, above occurs in any jurisdiction in relation to the counterparty or any of its subsidiaries; or 318

321 (p) the counterparty ceases to be entitled to operate, or ceases to operate the settlement account or, where the settlement account is opened in the name of a third party, such third party ceases to be so entitled or to so operate or withdraws its consent to the designation thereof as the settlement account for the purposes of this Documentation; or (q) the counterparty fails to comply with the Eurosystem s rules concerning the use of securities the subject of a transaction; or (r) (s) (t) the counterparty fails to provide to the Bank any information relevant to the Eurosystem s monetary policy operations, which failure causes severe consequences for the Bank; or the counterparty becomes subject to the freezing of funds and/or other measures imposed by the EU under Article 75 of the Treaty restricting the counterparty s ability to use its funds; or the counterparty becomes subject to the freezing of funds and/or other measures imposed by a Member State restricting the counterparty s ability to use its funds; or (u) all or a substantial part of the counterparty s assets are subject to a freezing order, attachment, seizure or any other procedure that is intended to protect the public interest or the rights of the counterparty s creditors; or (v) all or a substantial part of the counterparty s assets are assigned to another entity; or (w) any other impending or existing event the occurrence of which may threaten the performance by the counterparty of its obligations under the arrangement it entered into for the purpose of effecting monetary policy operations or any other rules applying to the relationship between the counterparty and any of the central banks of the Eurosystem; or (x) an event of default (not materially different from any event of default falling within sub-clauses (a) to (w) of this paragraph) occurs in relation to the counterparty or any of its subsidiaries under any agreement concluded with any other member of the Eurosystem entered into for the purposes of the management of the foreign reserves or own funds of any such member of the Eurosystem, An event of default is to be treated as occurring: a) in the case of an event which arises in relation to the Counterparty and falls within sub-paragraphs (d) or (o) or (s) (in the case of (o), to the extent that it relates to subparagraphs (d) ), at the time when the relevant event occurs; b) in any other case, at the time designated by the Bank for such purpose in a notice i) served by the Bank, ii) served not more than three Irish Business Days before the time so designated, and

322 iii) stating that the relevant event is to be treated as an event of default for the purposes of these terms and conditions. If an event of default has occurred the Bank shall be deemed to have immediately terminated each transaction hereunder and, subject to the following provisions, the performance of all payment obligations of the parties including their respective obligations concerning the retransfer of the euro amount and of the transfer of the re-transfer foreign-currency amount shall be effected only in accordance with the provisions below: a) the replacement values of the euro amount and the re-transfer foreign-currency amount shall be established by the Bank for each outstanding transaction on the basis that such replacement values shall be represented by such amounts as would be necessary to preserve for the Bank the economic equivalent of any payments by the parties that would have been required on the re-transfer date if the transactions hereunder had not been terminated; and b) on the basis of the sums so established, a calculation shall be made by the Bank (as at the re-transfer date) of what is due from each party to the other under these terms and conditions and the sums due from one party shall be converted, where necessary, into euro and set off against the sums due to the other and only the net balance shall be payable by the party having the claim thereby valued at the lower amount and such net balance shall be due and payable on the next following Irish Business Day. Any amount payable by the counterparty to the Bank shall, at the option of the Bank, be reduced by being set-off against any amount(s) payable (whether at such time or in the future or upon the occurrence of a contingency) by the Bank to the counterparty (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Bank and the counterparty or instrument(s) or undertaking(s) issued or executed by the counterparty to, or in favour of, the Bank including, without limiting the generality of the foregoing, any deposits placed by the counterparty with the Bank. The Bank will give notice to the counterparty of any set-off effected under this paragraph. If an obligation referred to in this paragraph is unascertained, the Bank may in good faith estimate the amount of such obligation and set-off in respect of such estimated amount, subject to the Bank accounting to the counterparty when the amount of such obligation is ascertained. The Bank shall, for the purposes of the set-off referred to above, be entitled to convert any relevant amounts into euro at the spot rate. Notices Any notice required to be given under the terms and conditions and/or any transaction shall be deemed to be duly served if left at or sent by registered or recorded delivery post or by facsimile transmission, in the case of a notice to the Bank at P.O. Box 559, Dame Street, Dublin 2, SWIFT number IRCEIE2DXXX, fax number , marked for the attention of Market Operations Desk, Financial Markets Division, or to such other address, SWIFT or fax number as the Bank may notify to the counterparty in writing and in the case of a notice to the 320

323 counterparty at such address, SWIFT, or fax number as the counterparty may notify to the Bank in writing. Any such notice shall be deemed to be served: a) if left at the address of the party to be served, when it is so left if it is left between 9:00 and 17:00 on an Irish Business Day or, if it is left before 9:00 on an Irish Business Day, at 9:00 on that Irish Business Day and in all other cases at 9:00 on the next Irish Business Day; b) if sent by post, at 12:00 on the second Irish Business Day following the day of posting; and c) if sent by SWIFT, or by facsimile transmission, when it is so sent if it is sent between 9:00 and 17:00 on an Irish Business Day or, if it is sent before 9:00 on an Irish Business Day at 9:00 on that Irish Business Day and in all other cases at 9:00 on the next Irish Business Day. In proving the giving of a notice it shall be sufficient to prove that the notice was delivered at the address for service or that the envelope containing such notice was properly addressed and posted (as the case may be). Any notices or communications in relation to these terms and conditions and/or any transaction may be given by either party to the other by any mutually acceptable electronic means of communication, including SWIFT messages, provided that, where relevant, any such notices or communications are duly authenticated. The following contact details should be noted in respect of the Bank: Market Operations Desk, Financial Markets Division, Telephone Number: Facsimile Number: Non-Assignability None of the rights and obligations of the counterparty under this Documentation and/or any transaction entered into hereunder, or any part thereof, shall be capable of assignment by the Counterparty without the prior written consent of the Bank.

324 ANNEX 5 REPORTING FRAMEWORK FOR THE MONEY AND BANKING STATISTICS OF THE EUROPEAN CENTRAL BANK INTRODUCTION Council Regulation (EC) No. 2533/98 of 23 November 1998 concerning the collection of statistical information by the European Central Bank 129 defines the natural and legal persons which are subject to reporting requirements (the so-called reference reporting population), the confidentiality regime and the appropriate provisions for enforcement in accordance with Article 5.4 of the Statute of the European System of Central Banks and of the European Central Bank (Statute of the ESCB). Furthermore, it entitles the ECB to use its regulatory power: to specify the actual reporting population; to define the ECB s statistical reporting requirements and impose them on the actual reporting population of participating Member States; and to specify the conditions under which the ECB and the national central banks (NCBs) may exercise the right to verify or to carry out the compulsory collection of statistical information. 2. GENERAL CONSIDERATIONS The purpose of Regulation (EC) No 25/2009 of the European Central Bank of 19 December 2008 concerning the balance sheet of the monetary financial institutions sector (Recast) (ECB/2008/32) 130, is to enable the ECB and, in accordance with Article 5.2 of the Statute of the ESCB, the NCBs which carry out the work to the extent possible to collect the statistical material required for the fulfilment of the ESCB s tasks and, in particular, its task of defining and implementing the monetary policy of the Union in accordance with the first indent of Article 127(2) of the Treaty on the Functioning of the European Union. The statistical information collected in accordance with Regulation ECB/2008/32 is used to establish the consolidated balance sheet of the monetary financial institutions (MFI) sector, the principal aim of which is to provide the ECB with a comprehensive statistical picture of monetary developments covering the aggregated financial assets and liabilities of MFIs in the participating Member States, which are viewed as one economic territory. For statistical purposes, the ECB s reporting requirements in the context of the consolidated balance sheet of the MFI sector are based on three main considerations. 128 The content of this annex is provided for information purposes only. 129 OJ L 318 of 27 November 1998, page OJ L 15 of 20 January 2009, page

325 First, the ECB must receive comparable, reliable and up-to-date statistical information which is collected under comparable terms and conditions throughout the euro area. Although the data are collected in a decentralised way by NCBs in accordance with Articles 5.1 and 5.2 of the Statute and, as far as necessary, in combination with further statistical requirements for Community or national purposes, a sufficient degree of harmonisation and compliance with minimum reporting standards is required in view of the need to establish a reliable statistical basis for the definition and conduct of the single monetary policy. Second, the reporting obligations set out in Regulation ECB/2008/32 must observe the principles of transparency and legal certainty. The reason for this is that that Regulation is binding in its entirety and directly applicable throughout the euro area. It imposes obligations directly on natural and legal persons on which the ECB may impose sanctions whenever the ECB s reporting requirements are not fulfilled (see Article 7 of Regulation (EC) No 2533/98). The reporting obligations are therefore clearly defined and any discretion exercised by the ECB when verifying or compulsorily collecting statistical information follows identifiable principles. Third, the ECB must minimise the reporting burden involved, in conformity with the statistical principles that govern the development, production and dissemination of statistics by the ESCB (see Article 3a of Regulation (EC) No 2533/98). These principles are further defined in the public commitment on European statistics by the ESCB, as published on the ECB s website Third, the ECB must minimise the reporting burden involved (see Article 3 (a) of Council Regulation (EC) No. 2533/98). Therefore, the statistical material collected by NCBs under Regulation ECB/2008/32 is also used to calculate the reserve base in accordance with Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves (ECB/2003/9). 131 Regulation ECB/2008/32 only defines, in general terms, the actual reporting population and its reporting obligations, and the principles according to which the ECB and the NCBs normally exercise their competence to verify or compulsorily collect statistical information. The details of the statistical information to be reported in order to fulfil the ECB s statistical reporting requirements and the minimum standards to be followed are specified in Annexes I to IV to Regulation ECB/2008/32 3. ACTUAL REPORTING POPULATION; LIST OF MFIs FOR STATISTICAL PURPOSES MFIs comprise resident credit institutions, as defined in Union law, and all other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs and, for their own account (at least in economic terms), to grant credit and/or invest in securities. The ECB establishes and maintains a list of institutions in accordance with this definition and following the classification principles specified in Annex I to Regulation ECB/2008/32. The competence to establish and maintain this list of MFIs for statistical purposes lies with the ECB s Executive Board. The population of MFIs resident in the euro area constitutes the actual reporting population. 131 OJ L 250 of 2 October 2003, page 10.

326 NCBs are entitled to grant derogations to small MFIs in accordance with Article 8 of Regulation ECB/2008/32. These derogations enable NCBs to apply the method of cutting off the tail. 4. STATISTICAL REPORTING OBLIGATIONS To establish the consolidated balance sheet, the actual resident reporting population must report statistical information related to their balance sheet on a monthly basis. Further information is required on a quarterly basis. The statistical information to be reported is further specified in Annex I to Regulation ECB/2008/32. The relevant statistical data are collected by the NCBs, which must define the reporting procedures to be followed. Regulation ECB/2008/32 does not prevent NCBs from collecting, from the actual reporting population, the statistical information necessary to fulfil the statistical requirements of the ECB as part of a broader statistical reporting framework which the NCBs establish under their own responsibility in accordance with Union or national law or established practice and which serves other statistical purposes. However, this should be without prejudice to the fulfilment of the statistical requirements set out in Regulation ECB/2008/32. In specific cases, the ECB may rely on statistical information collected for such purposes to fulfil its requirements. The consequence of a derogation being granted by an NCB as defined above is that the small MFIs concerned are subject to reduced reporting obligations (implying, inter alia, only quarterly reporting) which are compulsory in the context of minimum reserves and are specified in Annex III to Regulation ECB/2008/32. Requirements for those small MFIs that are not credit institutions are set out in Article 8 to that Regulation. However, MFIs which have been granted a derogation have the option of fulfilling the full reporting requirements. 5. USE OF STATISTICAL INFORMATION UNDER THE ECB REGULATION ON MINIMUM RESERVES To minimise the reporting burden and to avoid any duplication in the collection of statistical information, the statistical information related to the balance sheet reported by MFIs under Regulation ECB/2008/32 is also used to calculate the reserve base under Regulation ECB/2003/9. Indeed, for statistical purposes, the reporting agents have to report data to their respective NCB in accordance with the framework of Table 1 below, which is included in Annex III to Regulation ECB/2008/32. In Table 1, the boxes marked with an * are used by the reporting institutions to calculate their reserve base (see Box 11 in Chapter 8 of this publication). In order to make a correct calculation of the reserve base to which a positive reserve ratio is applied, a detailed breakdown is required for deposits with an agreed maturity of over two years, for deposits redeemable at notice of over two years and for repo liabilities of credit 324

327 institutions vis-à-vis the ( domestic and other participating Member States ) MFIs, credit institutions subject to reserve requirements, ECB and NCBs and general government sectors, and vis-à-vis the rest of the world. Furthermore, depending on the national collection systems and without prejudice to full compliance with the definitions and classification principles of the MFI balance sheet set out in Regulation ECB/2008/32, credit institutions subject to reserve requirements may alternatively report the data necessary to calculate the reserve base, except those on negotiable instruments, in accordance with Table 1a, provided that no bold printed positions of Table 1 are affected. Annex III to Regulation ECB/2008/32 contains specific and transitional provisions and provisions on mergers involving credit institutions in respect of the application of the minimum reserve system. Annex III to Regulation ECB/2008/32 includes, in particular, a reporting scheme for credit institutions in the tail. Credit institutions in the tail have to report, as a minimum, quarterly data necessary to calculate the reserve base in accordance with Table 1a. These institutions ensure that the reporting according to Table 1a is fully consistent with the definitions and classifications applicable in Table 1. The tail institutions reserve base data for three reserve maintenance periods are based on end-of quarter data collected by the NCBs. Annex III also includes provisions on reporting on an aggregated basis as a group by credit institutions. On receiving authorisation from the ECB, credit institutions subject to minimum reserves within a single national territory may report statistical data regarding their consolidated reserve base as a group, provided that all the institutions concerned have renounced the benefit of any lump-sum allowance from the reserve requirement. The benefit of the lump-sum allowance remains, however, for the group as a whole. If a group of credit institutions has been permitted to hold minimum reserves through an intermediary but does not benefit from such group reporting, the relevant NCB may authorise the intermediary to carry out aggregated statistical reporting (other than in respect of the reserve base) on behalf of this group of credit institutions. In this case, the benefit of the lump-sum allowance remains for each member of the group. All the institutions concerned are included separately in the ECB s list of MFIs. Furthermore, the annex includes provisions to be applied in the case of mergers involving credit institutions. The terms merger, merging institutions and acquiring institution have the meaning laid down in Article 1 of Regulation ECB/2003/9. For the maintenance period within which a merger takes effect, the reserve requirements of the acquiring institution are calculated and have to be fulfilled as set out in Article 13 of that Regulation. For consecutive reserve maintenance periods, the reserve requirements of the acquiring institution are calculated on the basis of a reserve base and of statistical information in accordance with specific rules (see the table in Annex III to Regulation ECB/2008/32), if applicable. Otherwise, the normal rules for the reporting of statistical information and the calculation of reserve requirements, as set out in Article 3 of Regulation ECB/2003/9, apply. Moreover, the relevant NCB may authorise the acquiring institution to fulfil its obligation to report statistical information through temporary procedures. This derogation from normal reporting procedures must be limited to the minimum time possible and, in any case, should not exceed

328 six months after the merger has taken effect. This derogation is without prejudice to the obligation for the acquiring institution to fulfil its reporting obligations in accordance with Regulation ECB/2008/32 and, if applicable, its obligation to assume the reporting obligations of merging institutions. 6. VERIFICATION AND COMPULSORY COLLECTION The ECB itself and the NCBs normally exercise the competence to verify and compulsorily collect statistical information whenever minimum standards for transmission, accuracy, conceptual compliance and revisions are not fulfilled. These minimum standards are set out in Annex IV to Regulation ECB/2008/ NON-PARTICIPATING MEMBER STATES As a regulation under Article 34.1 of the Statute of the ESCB does not confer any rights or impose any obligations on Member States with a derogation (Article 42.1 of the Statute of the ESCB) and on Denmark (Article 2 of the Protocol on certain provisions relating to Denmark) and is not applicable to the United Kingdom (Article 8 of the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland), Regulation ECB/2008/32 is applicable only in the participating Member States. However, Article 5 of the Statute of the ESCB concerning the competence of the ECB and the NCBs in the field of statistics and Regulation (EC) No 2533/98 are applicable in all Member States. This also implies, together with the second and third indents of Article 4(3) of the Treaty on European Union, an obligation on the non-participating Member States to design and implement at the national level all the measures that they consider appropriate in order to carry out the collection of statistical information needed to fulfil the ECB s statistical reporting requirements and the timely preparations in the field of statistics in order for them to become participating Member States. This obligation is made explicit in Article 4 and recital 17 to Regulation (EC) No 2533/98. For reasons of transparency, this special obligation is reiterated in the recitals to Regulation ECB/2008/

329 Table 1: Data required to be provided at monthly frequency (stocks) Table 1: Data required to be provided at monthly frequency (continued)

330 Table 1 Notes: (1) Cells marked with an * are used in the calculation of the reserve base. With respect to debt securities, credit institutions will either present proof of liabilities to be excluded from the reserve base or apply a standardised deduction of a fixed percentage specified by the ECB. Cells in thin print are reported solely by credit institutions subject to reserve requirements (RR). See also special rules on the application of minimum reserves in Annex III to Regulation ECB/2008/32. (2) The reporting of this item is voluntary until further notice. (3) Data under this item may be subject to different statistical collection procedures, as decided by an NCB in accordance with the rules contained in Annex I, Part 2 to Regulation ECB/2008/32. (4) Central Counterparties (5) Sole proprietorships/unincorporated partnerships 328