The deputy head of the Central Bank said any influx of financial services firms to Dublin, arising out of Brexit, could pose “a broad range” of risks to the Irish economy.
Speaking at the Irish Centre for European Law in Dublin yesterday, Sharon Donnery poured cold water on the idea of Dublin — or any other EU city — becoming “a new London” in terms of hoovering up the vast majority of financial services jobs from firms looking to leave the English capital in search of a new EU home.
She, however, added any new business that does come in will provide pros and cons for the Irish economy.
“I do not believe ‘a new London’ will, necessarily, emerge in Europe, but rather there may be a fragmentation of financial services across several European cities,” she said.
“The establishment of new firms does, indeed, bring the prospect of potential upside in the form of new employment in the financial services sector. However, it is too early to say how material this will be.
The potential establishment of new business lines in Ireland also presents a broad range of risks. For the Central Bank, from a financial stability perspective, a key consideration is under-standing the capacity of any potential firm to cause harm to the financial system, the economy and to citizens through its course of business — particularly were it to fail,” she added.
Ms Donnery said new entrants should expect a “rigorous” assessment of regulatory standards and “intrusive ongoing supervision” of their activities.
“Brexit has the potential to significantly change the financial services landscape in some jurisdictions as certain activities, which have historically taken place in London, relocate to ensure access to the single market,” she said.
She also said that while the number of queries being made by London-based firms to the Central Bank about Dublin — from banks and markets firms about payments, electronic money and insurance authorisations — have continued to increase, these have largely been “exploratory”.
“Many firms will wait until Article 50 is triggered before taking concrete decisions on activity and location,” she said.
Ms Donnery also reiterated the Central Bank’s belief that given Ireland’s high level of exposure to the UK economy, the overall effect of Brexit to the Irish economy will likely be “negative and material”.
“In the transition period to establishing new arrangements between the UK and the EU, there is the potential for further bouts of heightened uncertainty and risk aversion,” she said.
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