THE IDA, which aims to attract foreign direct investment into the State, has expressed concern that the Government would be promoting "a competitor jurisdiction" if it agreed to a North-South initiative to encourage financial services firms in the IFSC to set up back-office operations in the North.
The concern was expressed in internal Department of Finance documents released to The Irish Timesunder the Freedom of Information Act.
Last April, Brian Cowen, then minister for finance, and Peter Robinson, then the North's minister for finance, said IFSC companies could set up back-office administration operations in Northern Ireland in a bid to cope with the financial skills shortage in the South at the time.
In a briefing document for Mr Cowen's meeting with Mr Robinson on April 14th, when they announced the cross-Border financial services initiative, department officials said: "The IDA did express some concerns with the Government promoting what they regarded as a competitor jurisdiction for investment and they were worried that Invest NI (the IDA's counterpart in the North) would use this announcement when promoting other financial services initiatives which they are pursuing with other potential investors."
Another department memo said the IDA had stressed at an earlier meeting "the success achieved in the regionalisation of financial services in Ireland, building from the strengths of the IFSC and the potential for increased competition from NI in the future".
Department officials said in another memo that they had to be watchful of the "minimum activities" rule, which stops companies setting up brass-plate operations.
"We must be very careful here," said one official. He added that the Government has been resisting an initiative which allows funds firms "to freely passport" across the EU, meaning that the companies could administer Irish-domiciled funds from another European state.
"Ourselves and the UK authorities are in opposite camps on this issue. The Financial Regulator does not want to touch the minimum activities issue until the EU proposal is finalised," he said.
Under the cross-Border initiative, the regulator can permit firms to set up back offices in the North on a case-by-case basis.
A senior department official, in a handwritten note to Mr Cowen on a memo outlining what was involved in the initiative, wrote: "In truth, there is only limited actual action involved - it is more a statement of goodwill toward the development of a Northern Ireland financial services industry - no doubt the NI people will want to build on it, however."
In an internal e-mail at the department, one senior official said the initiative would not require legislative changes "but merely a reaffirmation of the status quo". The official wrote: " not a huge deal from our point of view, except in regard to North/South co-operation, but the NI side will have a different view on the significance."
At the press conference announcing the initiative on April 14th, Mr Robinson said there were up to 9,000 vacancies in the financial services industry in the South, but not enough people to fill them.
A senior official referred to the figure mentioned by Mr Robinson in an e-mail to a colleague later that day, saying: "I thought that might be misleading." Another departmental memo says the regulator would allow funds companies in the Republic to set up in the North "providing proper controls were in place and the regulator is in a position to exercise effective regulatory oversight in line with its obligations under EU law".
