Amendments are to be introduced to the law relating to the covered bonds market so as to improve Ireland's competitive position.

The Asset Covered Securities Act 2001 allowed Irish banks, domestic and international, to raise funds on a competitive basis and since then bonds to the value of €44.8 billion have been issued in Ireland.

Covered bonds involve pooling assets, which are either residential mortgages or public sector loans in the Irish context, and issuing bonds against these pools.

The bonds are structured and legislatively underpinned in such a way as to provide a high level of security for investors, while making a competitive means of funding available for financial institutions.

While the issuers of covered bonds are European banks, those who invest in the bonds, mostly pension funds and banks, are located around the world.

In this way Irish covered assets securities are a global capital markets product.

The Minister for Finance, Brian Cowen, said he had approved amendments to the Act in response to the developing nature of the business and to anticipate the coming into effect of new EU provisions.

"It is essential that Ireland moves quickly to update the provisions of the 2001 Act," Mr Cowen said.

Mr Cowen said he had worked closely with the Irish Bankers Federation and the financial regulator on the proposals which were approved yesterday by the Government.

It is proposed that the measures will pass into law this year.