Photographer: Chris Ratcliffe/Bloomberg

Dublin's Missing Brexit Bankers Trigger Political Blame Game

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  • Regulator coming under political pressure to attract business
  • EU cities competing to attract firms from London after Brexit

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On the banks of Dublin’s River Liffey, a row over the destination of London bankers fleeing Brexit is brewing.

Now operating out of the office tower which came to symbolize Ireland’s financial crash, the nation’s central bank is battling political and industry pressure to do more to draw firms. Companies ranging from Lloyd’s of London to Morgan Stanley have opted to set up shop elsewhere, with Royal Bank of Scotland Group Plc this month choosing Amsterdam as its post-Brexit EU trading hub.

“Ireland’s performance in attracting investment from London has been disappointing and underwhelming,” Michael McGrath, finance spokesman for the main opposition party Fianna Fail, said. “I’m not sure to what extent the central bank is responsible for that but the wider message has to be sent out that Ireland is open for business.”

The bank has shot back, pointing out that Ireland’s light-touch regime a decade ago helped create one of the worst banking crisis in history. As a permanent reminder of the crash, the regulator is now headquartered in an eight-story building once earmarked for Anglo Irish Bank Corp., which cost the taxpayer about 30 billion euros ($35.2 billion) to rescue.

“There is increasing talk of regulation being overly burdensome or the Central Bank not being accommodating enough to potential new entrants,” Ed Sibley, who is responsible for supervising banks at the agency, said in a recent speech. “It strikes me that the loudest proponents of this thinking are those with the shortest memories regarding the lessons from the failures leading up to 2008.”

EU Base

The central bank said it has “dealt with all inquiries in an open, engaged and constructive manner,” and Ireland has had successes. Bank of America Corp. chose Dublin as its main EU base, while JPMorgan Chase and Co., Inc. bought an office block across the Liffey from the central bank that could hold about 1,000 people.

Yet, the Irish capital has also suffered a steady stream of losses. American International Group, Inc, which employs about 400 people in Dublin a short stroll along the riverfront from the central bank, opted for Luxembourg.

“The average turnaround time to get a banking license in Luxembourg is about six months. In Amsterdam, it’s 12 months,’’ Neale Richmond, a senator with the ruling Fine Gael party and ally of new Irish Prime Minister Leo Varadkar. “Here, it’s 12 to 18 months.”

Frankfurt Ahoy

Frankfurt has emerged as the biggest winner, with Standard Chartered Plc and Nomura Holdings Inc. already picking the city for their new EU base. While the Irish regulator has denied suggestions it told bankers it doesn’t want very risky businesses in Dublin, German regulator BaFin is considered by executives best suited to handling very complicated bank models.

“Dublin has refused to take all the activities because they have made experiences in the past by adding big banks,” Hans Reich, chairman of the supervisory board of Citigroup Inc.’s Global Markets Germany, said at a conference in Berlin in June, explaining why the bank had not decided to move more jobs to Ireland in preparation to Brexit.

The bank announced last month it would probably make Frankfurt its EU broker-dealer HQ. While Citigroup’s presence in Madrid, Paris, Amsterdam, Dublin and Luxembourg is also likely to grow over time, it said, the German city looks like the biggest winner.

Bank Warned

Last month, the Irish Times reported that Banking and Payments Federation Ireland had warned the bank that its requirements on training staff could hurt the government’s bid to win Brexit business. The Federation and central bank declined to comment.

Led by Governor Philip Lane, the bank is fighting back. First, it argues that its critics misunderstand the regulator’s role. Between 2003 and 2010, the organization’s mandate included promoting financial services. That responsibility was taken away after it failed to stop the real-estate bubble which eventually crushed the economy.

“The central bank is not looking to encourage or discourage new entrants,” it said in response to questions. “This is a job for other organizations with other mandates.”

Wins Ahead

Second, speaking privately, regulators say in some instances where Ireland has lost out, only a handful of jobs have been involved, and they question the logic of overly aggressively chasing such business. They maintain Dublin remains in contention for more wins, a point echoed by IDA Ireland, the government agency responsible for attracting firms which says the country “is about where we expected to be in terms of investments won. ”

Third, the bank disputes that it’s applying stricter standards than rival cities. In May, Lane said EU regulators are broadly seeking to apply the same rules in each country, and it wasn’t “accurate whatsoever” to say Ireland was overly cautious.

The bank was initially very careful in dealing with inquiries immediately after the referendum, according to a person familiar with the matter. The bank then pushed European authorities to provide guidelines to prevent companies playing off one city against another, the person said, and became significantly more open once those standards were in place.

More Pragmatic

“The central bank is becoming more pragmatic in how it handles the initial interface with firms contemplating a move to Ireland,” Kevin Thompson, chief executive officer of Insurance Ireland, said.

It may be that the central bank needs to be clearer in its message, one former regulator said.

“There may be a communication issue here,” said Peter Oakes, who worked at the central bank between 2010 and 2013 and now advises financial firms considering setting up in Ireland. “I don’t believe the Irish central bank is any more or less difficult to deal with than other regulators. But they allowed a narrative to develop that they were tough to work with, and once that perception is out there, it’s hard to counter.”

— With assistance by Gavin Finch, and Steven Arons

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