The governor of Ireland’s central bank has stressed the importance of transitional agreements to keep European financial markets running smoothly as the UK leaves the EU.
Speaking at the Barclays European Financial Capital Summit, Philip Lane said:
Both firms and regulators will need to be pragmatic in recognising the inevitability of periodic revisions to business plans during this phase and the importance of a transitional period to avoid potentially-disruptive cliff effects in the workings of the financial system.
Professor Lane pointed to recent statements from ECB executive board member Sabine Lautenschläger, who last week outlined potential transitional model for arrangements such as banks’ internal models.
He also echoed Ms Lautenschläger’s warning against local regulators engaging in a “race to the bottom” to attract British businesses.
Professor Lane said “as financial firms work out strategies to manage the implication of Brexit, it is important for the policy community to ensure that regulatory arbitrage does not play a meterial role.”
Earlier this month Ireland’s financial services minister complained to the European Commission that rivals were offering companies unfair incentives to encourage them to relocate some of their operations.
Dublin had high hopes of attracting new business from London after the Brexit vote, though bankers and officials have suggested that it has been less successful than rival cities like Frankfurt in early discussions.
Professor Lane said “a substantial proportion” of queries the Central Bank of Ireland has received since the vote “relate to a further scaling up of already-sizeable lines of activity or an expansion of the range of activities of currently-licensed financial entities”.
However, he added that “Ireland is likely to become a host to new categories of financial services”, and said the CBI is creating new teams to manage authorisation across banking, insurance, investment firms, investment funds and “financial market infrastructures”.
Its expansion efforts may be easier said than done, however: the bank, which has had restrictions on staff pay since the financial crisis, has struggled to attract and retain staff in recent years, and, even before the expansion drive, had almost 150 outstanding vacancies at the end of last year.