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Ireland not keen to host high-risk trading post-Brexit

Ireland not keen to host high-risk trading post-Brexit

Risks and scale have prompted this cautious response from Dublin

November 29, 2016: Ireland has indicated to a number of large investment banks that it would be hesitant to host large trading operations. The Irish central bank has signalled in talks with banks that they would encounter serious hurdles to gain regulatory approval for these operations, which would involve large sums of money compared to the small size of Ireland’s economy.

The reasoning behind the stance

"A lack of specialised supervisors and the risk of sophisticated investment banking to the state make Irish regulators reluctant to host such banks in Dublin," said a source who understands the line of thinking of the Irish central bank.

"Our sense is that the appetite in Ireland is not that high for balance sheet banks," said a source at a global investment bank.

The reluctance is said to stem largely from the unfortunate experience of having gone through a severe banking crash in 2008, which was followed by an international bailout.

Speaking anonymously, a source at a large investment bank with a global presence commented, "Ireland is being very realistic about what it can and what it wants to do. If you've come from all the troubles Ireland has, you want to be very careful about taking on risks."

Meanwhile, yet another banking source said, "Yes, Ireland wants insurers, asset managers, back office functions; but they don't want big balance sheet risk. They just don't want to take on that kind of risk and feel that they don't have the regulatory bandwidth to do that."

The news comes in spite of the country’s need to attract jobs in the financial sector from London after Brexit.

Likely fallout

What will most likely result from this stand is that Ireland will fail to become a destination of choice for what is considered to be some of the banking industry’s riskiest affairs. The investment banks involved are mostly American, Swiss and British, which are now figuring out how to gain access to the EU after Britain leaves.

The principal concern of these banks is where they can carry out trade which brings many risks and involves large balance sheets, such as the trading and clearance of European securities, euros and other market activities, which come under the purview of EU regulation. Carrying out such trade means the trading models employed must be carefully supervised. Coupled with the scale of such business, this has led to the cautious response from Dublin, say sources.

No blanket policy

However, a spokeswoman for the Irish central bank said that there is no blanket policy in place intended to turn away certain types of business. "The central bank is open to engagement with any firm wishing to obtain an authorisation," she said.

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