Dublin
05 January 2016
Reporter: Stephanie Palmer
Ireland prepared for post-Brexit influx
The Central Bank of Ireland is preparing for the possibility of financial services firms relocating from the UK to Ireland when the UK leaves the EU.

In an article written in late December 2016 and published in Finance Dublin in January, Gerry Cross, director of policy and risk at the Central Bank of Ireland, said the bank has “no objection to thinking constructively” about the challenge facing firms with regards to relocating in what could be a relatively short timeframe.

Cross said: “Many financial groups based in the UK are considering what changes they might need to make to reflect the changing relationship between EU and the UK.”

The central bank is engaging with financial services firms, considering potentially authorising and supervising those considering a change to their “group structural and geographical arrangements for a post-Brexit world”.

According to Cross, the central bank has already seen “a material number” of enquiries related to the UK’s vote to exit the EU. Although most of these have been of a preliminary nature, some have advanced.

He suggested that financial services firms looking for authorisation in Ireland will find the bank to be “engaged, efficient, open and rigorous”. However, the time taken to process any application will depend on the licence being sought, the approach of the applicant, the extent to which it can be standardised, and the complexity of the procedure.

The central bank will need to be satisfied that the business, or line of business, under authorisation will be run from Ireland. Cross said: “We will expect there to be a substantive presence.”

This means the board and management should be based in Ireland, and decisions are taken there.

“Another way of looking at this is that we will want to be very clearly satisfied that the risks that are associated with the business of the entity are governed, remunerated, managed and mitigated in and by that entity,” he said.

Cross suggested that the central bank will also focus on a firm’s own understanding of risk in its business model, and how risk is managed and mitigated.

“We also seek to ensure that the customer’s interests are central to the business proposition, from the suitability of products to the treatment of claims. This is the role of a regulatory authority,” Cross said.

“Proper business models, with convincing risk identification and management, focus on consumer needs, suitable products, sound finances, strong boards and executives, can be expected to be approved, whether or not such business models already exist in Ireland.”

With regards to insourcing and outsourcing practices, Cross said the bank has no particular issue with this “up to an appropriate point”.

However he noted that insourcing and outsourcing can be a source of risk, and that this is something the central bank will consider.

“In particular, we will be focused closely on the principle that while an activity may be outsourced, responsibility for it may not. We will always want to see that there is the level of expertise and seniority within the entity to effectively oversee and manage such outsourcing.”

Finally, Cross addressed the central bank’s ability to cope with the potential of a high volume of applications over a short period of time, and to carry out the oversight required, stressing that planning for 2017 “reflects the additional resources needed”.

He concluded by recognising that financial services firms are facing complex decisions with far-reaching implications, as well as practical constraints if they decide to relocate.

“A key component of a successful and attractive jurisdiction for the location of financial services activities is a strong and independent regulator, with international credibility.”

“Delivering this is, in my view, by far the most valuable contribution that the central bank can make to the attractiveness of the jurisdiction as a location for financial services firms.”

However, Cross also stressed: “Regulatory competition should not be a determining factor in where firms choose to seek authorisation”, adding: “The Central Bank does not have a role in seeking to attract business to Ireland.”

More Industry news
The latest news from Asset Servicing Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
ESG key for millennial investors
22 March 2017 | Luxembourg | Reporter: Stephanie Palmer
Millennial investors find environmental, social and governance factors to be important, but their return expectations are unrealistic
UK pension funds embrace alternatives
22 March 2017 | London | Reporter: Drew Nicol
UK public sector pension funds are jostling to expand their alternatives exposure as a way to diversify their portfolios
ESG changing the face of asset management
21 March 2017 | Luxembourg | Reporter: Stephanie Palmer
The role of the asset manager is evolving as a more challenging regulatory environment and changing demographics bring environmental, social and governance issues to the fore
Brexit poses threat to CMU success, says Clearstream
16 March 2017 | Frankfurt | Reporter: Drew Nicol
Strained political relations in the EU has put the harmonisation efforts of Europe’s financial markets, such as the European Central Bank’s T2S settlement platform, under “severe stress”, according to Clearstream
Euroclear to enter US equity clearing space
15 March 2017 | Brussels | Reporter: Drew Nicol
Euroclear is on the cusp of gaining access to providing limited clearing for US equities
Torstone builds on Japanese business
08 March 2017 | Tokyo | Reporter: Stephanie Palmer
Torstone Technology is expanding its services in Japan, having secured a mandate to provide its Inferno collateral management solution to Natixis Japan Securities
Standard Life and Aberdeen agree £11 billion merger
6 March 2017 | London | Reporter: Stephanie Palmer
Standard Life and Aberdeen Asset Management are set to create Britain’s largest asset manager, agreeing terms for an £11 billion merger