Euroclear forms back-up plan for Irish share trading after Brexit

The company behind the settlement of shares traded on the Irish Stock Exchange is working on a back-up plan to continue to service the market in the wake of Brexit, having decided in April to abandon the idea of setting up a central securities depositary (CSD) in Ireland.

For the past two decades, the settlement of trades has been carried out by a UK-based CSD called Crest, operated by Euroclear UK & Ireland in London, making Ireland the only country in the EU that doesn't have a separate system. Crest will lose the right to passport services into the State when the United Kingdom leaves the European Union.

The Euroclear group, which is based in Brussels, made it its ambitions clear last year of setting up a separate CSD in Ireland after Minister of Finance Paschal Donohoe sought applications through the Central Bank.

However, Euroclear pulled plans to set up an Irish unit called Euroclear Ireland just over two months ago, following discussions with the Central Bank and the Bank of England.

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Sources said one of the plans now being considered is for Euroclear in Brussels to take over and passport the services currently carried out by its London-based Crest securities depository for the Irish market.

“Euroclear stopped work on a stand-alone Irish CSD after discussion with regulators. Euroclear UK & Ireland intends to continue to offer settlement in Irish corporate securities if permitted to do so,” a spokesman for the company said, noting that the market currently has a transition period to the end of December 2020 to deal with the fallout from Brexit.

The UK is officially due to leave the EU in March next year.

Declined to comment

“Euroclear continues to support efforts by the Irish market to evaluate the different available options,” the spokesman said, declining to comment on the options being considered.

The total value of Irish securities – shares, corporate bonds and exchange-traded fund securities – held by Crest in the UK is about €182 billion. Irish government bonds are settled in Euroclear Bank, an international CSD incorporated in Belgium.

A CSD allows investors in shares and bonds to hold assets in electronic form rather than holding physical certificates. Crest also assists companies in the payment of dividends and the Revenue Commissioners in collecting stamp duty, currently charged at a rate of 1 per cent on Irish share trading on the main Irish market.

Euroclear had signalled in a paper published in March that setting up a new CSD in Dublin would lead an increase in the cost of settlements on Irish trades, as it would trigger an “associated dedicated fix cost base of services, property and staff”.