Central Bank rejects negative European watchdog findings on Brexit-related approvals

European Securities and Markets Authority remarks at odds with bank’s reputation among financial firms as tough regulator

The Central Bank of Ireland has pushed back at some negative findings by a European Securities and Markets Authority (ESMA) review of its Brexit-related authorisations of fund managers.

Still, the wider ESMA report on peer reviews of how various regulators have handled the relocation of activities from the UK concluded that Irish supervisors fared well in most aspects of the approvals process for so-called MiFID investment firms and trading venues.

The review found that in a small sample of relocating fund managers, the Central Bank of Ireland (CBI) “did not meet expectations” in relation to assessing applicant firms’ human and technical resources and outsourcing arrangements.

The Central Bank said in a statement to the ESMA, published in the report, that the findings for fund management companies “do not accurately represent the high standards applied by the CBI or the positive outcomes achieved by the rigorous and substance-focused authorisation processes that evolved significantly over the course of Brexit”.


The report highlighted a case where the Central Bank authorised a large, unnamed fund manager with up to €90 billion of client assets that effectively employed two staff members and was supported by five part-time secondees from a service provider and three “support staff” working in a group entity in the UK.

Supervisory approach

However, the report highlighted the Central Bank said it required the fund manager to hire more staff when it went about extending its licence six months after initial authorisation.

The Central Bank also emphasised that its supervisory approach evolved over time following engagement with the ESMA’s supervisory co-ordination network and that it did not allow such arrangements for other relocating firms.

In another case, the Central Bank authorised an applicant firm to manage €500 million of assets under management with the equivalent of 2.4 full-time employees, “despite performing a broad range of business activities and employing a variety of complex investment strategies”, it said.

“The [Peer Review Committee] is of the view that these cases appeared problematic in terms of the sufficiency of human and technical resources as the vast majority of day-to-day business activities were still performed out of the UK despite the relocation,” it said. “This observation was supported by the fact that up to 90 per cent of the management fees generated by local entities in the sample cases assessed were paid to the UK group for the provision of portfolio management services.”

The findings are at odds with the Central Bank’s reputation among financial firms as a tough regulator when it comes to securing various types of approvals.

Post-Brexit relocations

The Central Bank statement to the ESMA said that the governance structure and resourcing of the two funds had already been amended before the peer review.

Dublin has been the top location for financial services companies looking to relocate operations from the UK as a result of Brexit, with 36 groups having committed to moving staff or activities here since the June 2016 referendum, according to EY’s latest Brexit Tracker study. Luxembourg is the second most popular destination, followed by Frankfurt and Paris.

Ireland was among four countries assessed by the ESMA peer review for fund manager relocations, and three countries looked at each for the movement of MiFID firms and trading venues.

The Central Bank said in a statement to The Irish Times that the review contained “many positive findings and valuable insights” and that most of the findings had been addressed.

“Since the start of the Brexit period, our approach to authorisations has continued to evolve while being strongly embedded in EU processes,” it said.

“It has reflected the dynamic and evolving nature of the Brexit event itself. Overall outcomes have been high-quality and strongly aligned with consumer and investor protection and with the enhanced functioning of the EU single market in financial services.”

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times