UK financial firms could flock here after Brexit - Bank
UK-based financial services firms could look to relocate to Ireland if Britain pulls out of the European Union, the Central Bank has said.
If this occurs, the impact on the sector here could be significant, with positive and negative consequences from an economic point of view.
British Prime Minister David Cameron has promised to renegotiate Britain's ties with the EU ahead of a membership vote by the end of 2017. In a special article along with its latest Macro Financial Review, the Central Bank said any potential shift in foreign direct investment from the UK to Ireland could lead to an increase in the size of the sector and would have an impact on supervision.
Dame Street said it has been engaging with firms across all parts of the financial sector regarding risks relating to a potential UK withdrawal.
It warned that for the banking sector, the impact on profitability could occur as a result of any slowdown in the UK economy and/or property market spillover effects, particularly through reduced lending to businesses and small and medium-sized companies dependent on UK economic conditions.
It warned that the five retail banks operating in Ireland have a total loan exposure of around €64bn, or 21pc, of their total assets, in the UK.
The Central Bank said any shock to the UK economy could cause issues for future growth, profitability and loan performance.
And it warned that Irish insurers could face restrictions upon their ability to conduct cross-border insurance business into the UK.
"A disorderly 'Brexit' could be associated with a loss of access to European markets for UK-based financial services firms," the Central Bank said.
"It is possible that some of these firms would look to expand/relocate/establish operations in another EU member country as a consequence, with Ireland a potential location.
"In such an event, the impact on the financial sector here might be significant, with positive and negative consequences from an economic perspective and a direct impact on the scale of the Central Bank's mandate, for example arising from increased numbers of authorisations, changes in type and complexity of business models including the possible establishment of financial market infrastructures, etc."