The Central Bank has begun laying the groundwork to accommodate a significant number of London based financial services firms looking to move their operations to Dublin in the wake of Brexit.
Gerry Cross, the bank’s director of policy and risk, said the bank is poised to help businesses “think constructively” about relocation and would take a practical approach as firms look to get their business models approved and their company authorised.
Speaking to the Press Association, Mr Cross said the bank had seen interest from a significant number of firms. "We have seen inquiries and interest from a significant number of firms. These firms are of many different types and cover a wide range of activities. "We recognise the practical constraints that firms are facing. Particularly around some of the timing issues: for example setting up businesses in Ireland, getting authorisation and thinking about model approval," he added.
“We have no objection to thinking constructively with firms about how this sequencing challenge might be addressed, without undermining our commitment to our responsibilities. ‘Grandfathering’ is not the most helpful concept in this context; rather it is about having a practical approach while meeting our regulatory obligations.”
London’s financial firms are waiting with bated breath to discover whether the UK can hold on to passporting rights which allow them to trade freely across the EU. The cost of a so-called “hard Brexit” to revenues in Britain’s financial services sector has been estimated to be as high as £38 billion, with up to 75,000 jobs in the firing line. This is on top of a £10 billion hit to the Treasury’s tax revenue, according to a study commissioned by TheCityUK.
Last week Ireland’s Industrial Development Agency (IDA) said over 100 companies, many currently based in the City, have inquired about relocating to the country after Brexit.
Mr Cross added: “There is also the important question of group-wide models and how they might operate. This can be a very complex question with many aspects including questions of supervisory reliance. “The Central Bank of Ireland’s good and long-standing relationship with UK and other authorities means that we will be in a good position to work through these aspects effectively and efficiently.”
The Central Bank is bolstering staff numbers in its insurance supervision directorate by more than a quarter as it looks to welcome insurers from London. However, the bank has moved to deny reports that Ireland was discouraging firms wanting to move investment banking or trading operations to Dublin because of regulatory concerns.
In a speech earlier this month, Cyril Roux, the CBI's deputy governor, said: "We have not sought to dissuade any such entities from seeking authorisation nor are we planning to do so."
The Central Bank has made clear that it does not want firms setting up small operations in Ireland just so they can access EU passporting rights. Mr Cross said firms must demonstrate that they have “proper business models, with convincing risk identification and management, suitable products, sound finances, and strong boards and executives” before gaining approval in Ireland. “The Central Bank has not ruled out, and is not planning to rule out, any particular business model on financial stability grounds,” he added.
The CBI moved to quash speculation that there was tension between the Bank and the Irish Government over firms relocating to Dublin post-Brexit. “The Government and the Central Bank communicate well. There is no material difference of view as to the role and approach of the Central Bank. We understand each other’s roles well and their different respective natures.”