The future of the International Financial Services Centre (IFSC) is a matter of considerable concern. With about 33,000 people employed across 500 businesses there is no argument over whether it’s a good thing, but nobody seems quite sure how best to generate growth.
An internal paper produced last year by the chief risk officer in the Department of Finance, Neil Ryan, called for a radical rethink in response to the changes that have taken place in financial services since 2008.
Easier said than done, of course, and little seems to have happened since Ryan’s report. There have been various kites flown but most of them involve niche opportunities, such as green finance, rather than a new departure.
The chief executive of Citi's Irish operations, Aidan Brady, has now entered the fray. As the head of one of the biggest and most long-established IFSC operations he deserves to be listened to.
Brady believes the future of the IFSC rests in the development and provision of technology-based services to international finance. These sort of services contributed $888 million of the $972.5 million pre-tax profit recorded by Dublin-based Citibank Europe last year, so he would seem to have the evidence to back up his claim.
There is no doubt the convergence between banks and technology companies is accelerating. Most of the big players in social media and ecommerce have clear ambitions in the area of banking or the grey area of non-bank financial services. PayPal’s Irish operations may be regarded as a technology business but it is also one of the largest financial services businesses in the State, although it remains unregulated. This bank/tech convergence should give rise to opportunities for the IFSC.
What is less clear is whether the revamped Irish regulatory regime is amenable to any of these hybrid companies that might want to go the whole hog and seek a banking licence. Many would argue that the regulatory pendulum has swung too far the other way here since the appalling failures of 2007. They have a point, but it may be a little early to reopen the wounds inflicted by the crash.
