‘No talks’ with US banks on move here

There has been no discussions between the Irish Central Bank and any US banks about a possible relocation to Dublin if the UK leaves the EU, according to sources. 

The Financial Times newspaper has reported over the past few days that a number of big US banks that have European headquarters in London could potentially move to Dublin if the UK leaves the EU following a referendum planned for 2017.

The Central Bank declined to comment on the piece. However, a source close to the Central Bank said there has been no discussions between the Irish regulator and US banks on this issue.

The FT piece also claimed that “Dublin is selling itself very hard at the moment” in efforts to attract business from London. But a spokesperson for the Department of Foreign Affairs said it was not government policy to canvass financial institutions to relocate to Dublin. British prime minister, David Cameron, has pledged to hold a referendum on UK’s EU membership in 2017 if the Conservative Party is re-elected following the 2015 general election. A number of lobby groups, including the influential British Bankers’ Association have warned that a ‘Brexit’ would have hugely damaging consequences for the City of London as a financial services centre.

University of Limerick economics lecturer, Stephen Kinsella, says what is being proposed in the FT article is “legal entity optimisation” which would not be good for the Irish economy.

This would mean that US banks would move their legal entity that controls their European businesses to Dublin, while leaving their physical operations, including well-paid employees, in London.

“This comes with a huge reputational risk for Ireland,” says Mr Kinsella. Moving a bank’s legal entity to Dublin would be seen as an attempt to avail of Ireland’s low corporate tax rate without creating any value-added activities, he adds.

“It is not even certain that these banks could do this because of the [OECD’s base erosion and profit shifting] BEPS project.” The OECD proposes to introduce policy over the next year that aims to clamp down on corporates avoiding corporate tax. It is highly unlikely that banks would move their physical activities to Dublin because it doesn’t have the critical mass for high-level finance operations, says Mr Kinsella. “At a human level they are not going to up sticks and move from Kensington or Chelsea to Ireland.”

Finance thrives in a cluster effect with hedge-fund managers, investment bankers and institutional investors all wanting to set up in close proximity to each other. This creates its own dynamic which Dublin would find very hard to replicate, says Mr Kinsella.