Shadow banking could trigger next financial crisis, ECB warns

Seen & Heard: the vulnerabilities of shadow banking, global tax reforms and outgoing tourism chief takes job in Saudi

The shadow banking sector is the “soft spot in the financial system” and could trigger the next financial crisis, the vice-president of the European Central Bank (ECB) has warned, according to a report in the Business Post.

In the aftermath of the rescue of Credit Suisse last week, Luis de Guindos said that he believed the European banking sector was “sound and resilient”, but the nonbank sector “could be a source of problems for the whole financial system”.

The nonbank sector involves firms which are engaged in bank-like activities but are neither registered nor regulated as banks. These include the likes of funds, insurance firms, venture capitalists and currency exchanges. It is also commonly known as the “shadow banking” or “market-based finance” sector.

De Guindos warned that firms in this sector had taken “a lot of risks” during the period of low interest rates which could now be exposed by rate rises, and could affect the wider financial system.


Global tax deal threatens €4.5 billion worth of Ireland’s corporate tax

As much as €4.5 billion worth of Ireland’s corporate tax base is now at risk from the implementation of a global tax deal, more than double the €2 billion it was estimated at three years ago, a report in the Business Post says. The new rules, which were formulated by the OECD, are due to come into effect next year.

While €4.5 billion is at the upper range of what could be lost according to internal modelling by the Department of Finance, it has also modelled a range of lesser impacts from the rules. It has warned that projecting an exact figure is “extremely difficult” due to multiple variables.

However, the department’s modelling does not take account of multinationals restructuring their operations in response to the reduction of Ireland’s competitiveness, which could have a significant impact on the volume of corporate tax paid here.

What the most recent tech cuts and bank runs could mean for Ireland

Listen | 31:46

Outgoing Tourism Ireland chief headhunted to lead Saudi agency

Niall Gibbons, the outgoing chief executive of Tourism Ireland, has been headhunted to lead a tourism agency created by Mohammed bin Salman, the crown prince and prime minister of Saudi Arabia, according to the Sunday Times.

Prince Mohammed is looking to promote Neom, a futuristic eco-city he is building next to the Red Sea as part of his Vision 2030 plan. Gibbons, who led Tourism Ireland for 14 years, will step down within days.

He will start at Neom Tourism in the next few weeks and is expected to relocate with his family to Tabuk, a province close to the border with Jordan.

Fund linked to billionaire Dermot Desmond plans to turn D4 offices into house

A fund linked to billionaire Dermot Desmond and his family has suffered a minor setback as it seeks to change an office development in Ballsbridge into a house, according to the Sunday Independent.

The fund, Celtic Trustees Limited, an Isle of Man trust set up for the benefit of Desmond’s children, made the application to change the use of the property in early March. The fund has owned the property since January 2014.

Arena barred by Central Bank from offering regulated financial services

A regulated financial services firm – with ties to wind energy investment firm Arena Capital – has been ordered by the Central Bank to suspend the provision of financial services, the Sunday Independent also reports.

The directive by the Central Bank to Arena Financial Services Limited comes just as a row between the shareholders of Arena Capital – a substantial player in the loan note market which claims to have €500 million of assets under management – is due to be aired in the High Court tomorrow.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times