Financial regulation post Brexit – the end of soft touch Dublin?

Published May 22 2017, Rory Flynn, head of legal at Corlytics

The full effect of Brexit is being felt in the financial services sector. JP Morgan has been the latest financial giant to announce a move to Dublin, buying an office with enough room for 1,000 staff. Meaning it will potentially double its current Dublin headcount of 500.

With Dublin just a hop, skip and a jump away from London, we expect many more firms to finalise intentions to either launch or expand operations in Ireland’s capital city. As Brexit uncertainty continues.

Whilst Dublin is geographically so close to London, firms moving operations there will need to be aware of the significant differences in financial regulation between both markets.

The Central Bank of Ireland (CBOI) is the regulator for firms to pay attention to. It is responsible for the supervision of most financial institutions in Ireland including banks, building societies and a broad range of non-bank firms. Compared to Great Britain’s Financial Conduct Authority (FCA) which regulates over 56,000 entities, the CBOI is currently responsible for regulating around 10,000 entities. It will now naturally be preparing to step this up ahead of a potential influx of new financial firms coming into the country.

BUT HOW DO BOTH REGULATORS CURRENTLY STACK UP ?

We’ve looked at our data from 2009 to present day and have found that for every USD$1.05 the Central Bank of Ireland fines, the Financial Conduct Authority fines USD$99. That is some difference. When the FCA does issue an enforcement notice, it is generally more severe than the CBOI. The CBOI currently is fining a lot less frequently than the FCA and for a lot less money. The average fine for the CBOI is approximately USD$800,000 whereas the average FCA fine is almost over 10 times this figure, at USD$8.9 million.

None of this demonstrates that the CBOI is a weaker or lesser regulator. Simply that the work it must do is a fraction of the FCA’s. International firms already in – and planning to move – to Dublin should expect an active regulator that is prepared to increase its enforcement activity if necessary and make itself known. It’s likely that fines from the CBOI will start to significantly increase. In the very near future, the current perception of a soft approach in Ireland may be misplaced.

Firms relocating from London should expect swift fines in the event of any wrongdoing upon relocation. These will be at the extreme end of the spectrum – more akin to fines issued under the FCA – to dissuade any further infractions.

If your firm is considering a move to Dublin and require regulatory support, do get in touch with Corlytics.

Rory Flynn, head of legal at Corlytics