It goes without saying that Brexit presents financial services firms with particular challenges. Transitional arrangements may ease the pain but will not solve the underlying problem which is the need to secure continued access to the EU/EEA single market.
It goes without saying that Brexit presents financial services firms with particular challenges. Transitional arrangements may ease the pain but will not solve the underlying problem which is the need to secure continued access to the EU/EEA single market. Equivalence arrangements may offer a viable solution for some sectors but they are vulnerable to political whim during their establishment and their maintenance. In our view, any equivalence regime is just one election away (in a large European country or indeed the UK itself) from being either swept away entirely or being amended to the point of uselessness. Obtaining a licence in Ireland will guarantee continued access to the EU/EEA single market post Brexit.
Regulatory Environment
Ireland has a single financial regulator – the Central Bank of Ireland (the “Central Bank”). It is a well-resourced modern regulator which is connected to and participates in all EU and international regulatory bodies. The Central Bank supervises a broad financial services industry which includes a very significant international sector. The Central Bank has a long track record of dealing with a wide variety of international firms establishing entities in Ireland. The most notable success of course is the investment fund industry which has gone from next to nothing 25 years ago to being a leading international centre now. General issues which arise from operating within an international group, such as outsourcing, matrix management and booking models, are well understood.
In recent years, and quite apart from Brexit, it has improved its authorisation processes to provide more transparency to applicants with the publication of defined application timeframes and service standards. As a reaction to the Brexit vote it has confirmed publicly that it is increasing its authorisation teams to deal with an increase in authorisation applications and we can confirm that we see evidence of this increased headcount on the ground.
Ireland as an EU hub
The Central Bank has a track record of authorising and supervising a very wide variety of international businesses. It has committed to ensuring it has the capacity to deal with any increases in demand put on it. When the modern, sophisticated regulatory environment is added to the other advantages offered by Ireland we believe it is very well placed to act as an EU hub for businesses currently based in the UK. As pointed out above, obtaining a licence in Ireland will guarantee continued access to the EU/EEA single market post Brexit.
Legal Environment
Ireland has traditionally been very diligent about implementing EU directives. It has consistently avoided any “gold plating” or read across to other sectors. There are no detailed rule books rather the relevant EU law and guidelines form the basis of the applicable regulatory regime. While clearly there are local regulatory requirements these tend to be focussed on the domestic industry and sectors which are not subject to EU Directives.
Authorisation Process – mind and management
In considering an application the Central Bank needs to see a proposal for an operation of substance and not a mere brass plate, the so called “mind and management” of the applicant must be in Ireland. In an effort to remain flexible, the Central Bank has no particular minimum headcount but expects firms to demonstrate how the proposed business adequately supports the business in Ireland. The board must meet regularly in Ireland and Irish based management must run the business and make key decisions here.
Although there is no fast track for firms authorised by the Prudential Regulation Authority or the Financial Conduct Authority, clearly their experience of dealing with such UK regulators will be a significant benefit. Most if not all of the policies and procedures that are needed to support an application will likely be both in place and be to a standard which will be acceptable to the Central Bank. Though the Central Bank’s authorisation process is rigorous the approach and overall structure will be familiar to UK firms.
Outsourcing
Outsourcing is normal in the financial services industry and is clearly permitted. Generally speaking all activities can be outsourced on an intra-group or third party basis provided sufficient substance is retained in the Irish entity. An applicant must demonstrate to the Central Bank that responsibility is not abdicated and that adequate supervision and security is in place.
Talent Pool
Companies locating in Ireland benefit from an experienced and skilled workforce with decades of experience in the financial services sector. Favourable demographics and consistent investment in education ensure a plentiful supply of highly qualified workers with excellent technical, language and customer services capabilities. Ireland is ranked first in Europe for completion of third level education and third for availability of skilled workers.
International Groups
The Central Bank recognises that many Irish financial service providers are subsidiaries of larger corporate groups. The Central Bank is accommodating of the fact that such subsidiaries are required to adopt group policies provided that such policies are appropriately tailored to meet the specific demands of the Irish business and Irish regulatory requirements.