|John Breslin||Callaghan Kennedy|
The impact of the UK's exit from the EU is one of the major headwinds for the Irish economy in 2017. Ireland has traditionally had a close trading relationship with the UK across all major sectors of the economy. Accordingly, in many respects Irish economic fortunes have been closely allied with those of the UK.
Since the outcome of the Brexit referendum there has been talk of Ireland growing its financial services sector as an alternative EU hub for UK businesses looking to preserve their passport to do business throughout the EU. At times the Irish financial regulator – the Central Bank of Ireland (CBI) – appeared not to be on message. As other EU capitals, notably Paris and Amsterdam, proactively marketed themselves as alternative locations to London, the CBI appeared to be conveying a cautious message that it would not tolerate regulatory arbitrage.
So far, 2017 has heralded a different approach by the Irish government and the CBI. First, the Irish government has flagged a need for Irish businesses to shift their focus away from the UK and towards the European 'mainland'. Second, the CBI has sent out a more welcoming message to new applicants.
It seems inevitable that the CBI will face an increase in applications for authorisation across many regulated sectors, particularly in the insurance, investment and asset management and banking sectors. Whether this is a trickle or a deluge, only time will tell. Either way, regulatory challenges lie ahead. In practical terms, the CBI will need to apply additional resources to turning applications around in an acceptable timeframe and it has already taken steps to prepare for a surge in applications, including embarking on a recruitment drive and improving internal efficiencies.
All of this is encouraging. However, UK-based financial services firms that choose to relocate to Ireland will be looking for regulatory certainty. In this regard, time will be of the essence. Furthermore, the CBI may have to consider its traditional approach of requiring applicant firms to be Irish-incorporated. This could pose challenges for UK-based firms in terms of migrating clients and other contracts across to the new entity. A workable outcome would be for the CBI to relax its traditional approach and for the firms to show that they will have real presence in Ireland rather than merely using the CBI authorisation as a springboard to passporting into the EU. Undoubtedly other – as yet unforeseen – issues will arise.
John Breslin and Callaghan Kennedy