Introduction
I am very pleased to address you this morning.
I would like to thank Pat Lardner and his team for the warm welcome. I would also like to congratulate Kevin Murphy on his recent elevation to the Chair of the IFIA and to acknowledge the outstanding job Fearghal Woods did as chairman for the last 12 months.
It has been a very busy time within the funds industry and I admire the determination and vigour of the IFIA and the funds industry in Ireland generally in dealing with various challenges while all the time growing and developing their business in Dublin and across the country and, in the process, creating employment directly and indirectly.
The Funds industry in the last year
Ireland has been through a very tough period in the past few years; we have grounds to be optimistic now on a number of fronts but in financial services the one constant has been the funds industry. The industry continues to create employment, to showcase our talents and to enhance Ireland’s reputation as a place to do business.
Last month I attended at the launch of the new Capita Headquarters down on Grand Canal Square. 800 new jobs were announced. The success of internationally traded financial services is not restricted to Dublin’s docklands anymore; indeed I understand that Munster alone now has some 1,400 direct jobs within the funds industry with many more employed in the other provinces outside Dublin. These are the jobs which sustain communities and our way of life; these are high quality jobs, increasingly in middle-office operations which demonstrate that Ireland remains open for business and open to the needs of business. The credit for this continued success is in large part down to the people in this room, the people who drive the industry through their efforts within their own firms and collectively through the Funds Industry Association
Measures under development by the Government
We all have our respective roles to play in restoring the economy and the funds industry has a very important part to play in the process. The target for the creation of some 10,000 jobs in the financial services sector is based, in large part, on expansion in internationally traded financial services. The public and private sector actors at Clearing House are committed to implementing the IFSC strategy statement. For its part my Department is looking at all the options. We are keen to listen to industry’s needs and respond in a timely and appropriate manner. Right now there are several measures which are drawing particular focus:
·AIFMD implementation
The first and most urgent is the implementation of the Alternative Investment Fund Managers Directive. The greater part of AIFMD implementation falls to the Central Bank and the Bank is to be congratulated on the recent publication of its draft AIFMD rulebook. However, the Government also has a policy development role to play. Work is at an advanced stage in preparing the transposing regulations to give national effect to the principles set out in the directive; I expect that process to be completed in the coming weeks.
·ICAV (New corporate structure for funds)
Development work is also continuing in my Department and the Central Bank on proposals for legislation for an open-ended investment vehicle designed to match such corporate entities available in other jurisdictions. The primary intention behind the initiative is to strip out unnecessary administrative and regulatory requirements while maintaining world class standards and oversight.
·FATCA
One of the more significant recent tax developments in the global financial sector, and something which has required a very significant input of resources from Finance, Revenue and from industry, has been the introduction by the USA of the Foreign Account Tax Compliance Act (FATCA).
The Inter-Governmental Agreement (IGA) reached between Ireland and the USA to Improve International Tax Compliance and Implement the FATCA provides very significant benefits to the financial sector in Ireland. Negotiating the agreement at inter-governmental level and providing for reporting to the US via the Revenue Commissioners has removed very significant administrative burdens from individual financial institutions, and provided a level playing-field for FATCA reporting across the industry as a whole.
Ireland was the fourth country in the world to sign an IGA, demonstrating our commitment to international tax transparency and administrative co-operation. This commitment is vital to protecting Ireland’s reputation as a responsible, regulated, on-shore jurisdiction, which was identified in the 5 year Strategy for the International Financial Services Industry in Ireland as being essential to the future success of the sector.
·REITs
Another significant development in Finance Bill 2013 was the introduction of a framework for Irish Real Estate Investment Trusts (REITs). The initial focus of REITs is the attraction of capital to the property sector, but it also provides a new property-based investment fund structure for the Irish market. Building on the established success of the Irish funds industry, this may have longer-term potential for the development of Ireland as a hub for the financing and management of international property investment.
·Islamic Finance
Islamic and Green finance are also garnering a lot of attention at the moment. The resilience of the funds industry and its appetite for developing new products and service lines has produced impressive results in recent years. The number of people directly employed in the funds sector fell in only one year during the financial crisis, and rose in 2011 to its highest level ever. To support the gathering momentum in the development of an Irish Islamic Finance industry, legislation was introduced in Finance Bill 2013 to remove barriers to the issuance of Islamic bonds in Ireland. My officials continue to work with the industry to support the development of these new sectors of the Irish funds industry.
·UCITS/MMFs
The industry faces challenges in responding to new developments at an international level.
The Government supports changes to the regulation of shadow banking activities to guard against the excesses of the past. We await specific proposals from the European Commission on the regulation of Money Market Funds with caution. While there has been a great deal of speculation about how certain measures might apply particularly to the Money Market Funds domiciled in Ireland as opposed to those which tend to be found in other European jurisdictions, it would be premature of me to comment at this stage and prior to the end of the Irish Presidency. Similarly, we are monitoring the proposals before the European Parliament for further changes to the regulation of UCITs, but again I would prefer as EU Presidency, not to comment before the Council has agreed its own position on the various elements of UCITS V.
Ireland’s Presidency
2013 is an important year for Ireland as we celebrate 40 years in the EU. A lot has changed in that time and I hope that in our current Presidency we will build on the best of our achievements and strive to better them.
In line with EU and national interests, the Irish Presidency is focused on stability, growth and jobs.
As financial services are very important to us, we have prioritised certain dossiers in that area that we view as being critical. The Banking Union programme of measures has been a high priority of the Irish Presidency because of its importance to breaking the sovereign/bank debt link. Breaking that link will make a substantial contribution to strengthening the European financial system.
Considerable work went into the CRD IV agreement by all parties concerned. We can be proud of our joint contribution to the Single Rulebook which is a prerequisite for a fully-fledged Banking Union. Building on Council Agreement reached under the Cypriot Presidency agreement has also been reached on the Single Supervisory Mechanism and is on course for adoption in July. Intensive efforts continue to accelerate Council discussions on the Recovery and Resolution file with a view to reaching agreement on key political issues, hopefully at the June Ecofin.
We are also are working hard to achieve a general approach on the legislative files in securities – the Directive and Regulation on Markets in Financial Instruments which we know as MiFID and MiFIR.
Agreement has also been reached with the European Parliament the Mortgage Credit Directive and the Transparency Directive.
For the remainder of our Presidency, we will continue to work towards Council Agreement on Central Securities Depositories (CSDs); progress discussions on PRIPS (Packaged Retail Investment Products) with a view to achieving Council General Approach, and work towards agreement at trilogues with Parliament on the Market Abuse Regulation (MAR). We have also opened council discussions on the 4th Anti-Money Laundering Directive (AML) which was published back in February.
The Financial Services agenda and in particular Banking Union is of central importance to the future of the European Union. Banking Union is of great importance in protecting our citizens from future financial Crises. But it is also a central pillar in the vision of the four Presidents of the Council, Commission, Eurogroup and ECB on the future of Economic and Monetary Union.
1. Irish Economy
I would like now to turn to matters on the domestic front. At events like this , just as in the Dáil and in the media, the economy remains a hot topic of conversation and a topic on which every individual has an opinion. However, as we approach the fiftieth anniversary of his visit to Ireland, it is perhaps worth recalling the words of President John F Kennedy when he said "too often… we enjoy the comfort of opinion without the discomfort of thought". When thinking about and discussing the economy it is worth bearing those words in mind, for such discussions can often be derailed by seductive rhetoric. Such is the importance of measures being undertaken in Ireland at the moment, that it is vital that we seek to elevate the discourse.
Many of you will all be aware, I’m sure, of the considerable challenges that Ireland faced following the unwinding of the domestic property bubble, and the aftermath of the global financial crisis. While we should be measured in our language, I think it is fair to say the Irish economy was in free-fall. Stripped of the support of the construction sector, we saw unemployment rise rapidly, GDP decline by 11 per cent and tax revenues fall by nearly a third. Ireland responded with an early and determined policy response. Not due to external forces, but because it was essential to put the public finances back on a sustainable path.
While these measures were a necessary precondition for Ireland to address the fiscal imbalance and return to stable growth, necessity and desirability seldom go hand-in-hand. The people of Ireland have sacrificed greatly in the wake of the crisis but these measures have stood to us and we are now starting to bear the fruits of our labour. Having returned to growth in 2011, 2012 saw a second successive year of growth for the Irish economy. Real GDP grew by 0.9 per cent - a resilient performance given trading partner weakness. This trend looks set to continue, with recent forecasts produced by my Department and others, projecting a further expansion of growth this year.
As is typical in small open economies such as Ireland’s, the traded sector is leading the recovery with the services sector playing an increasingly significant role in export growth, having grown by 8.9 per cent in 2012, owing much to the significant price and cost adjustments that have taken place in recent years. Encouragingly however, 2012 also provided the first tentative signs of a recovery in domestic demand. Personal consumption increased over the second half of the year and investment, having declined consistently and considerably since 2007, returned to full-year growth.
However, of most immediate relevance to the people of Ireland will be the encouraging signs in the labour market of late. This is an area which the Government has allocated considerable resources in recent years and addressing the high unemployment level remains the number one priority. In this regard I am pleased to report that we are now seeing stabilisation and even tentative signs of recovery. A second successive quarter of employment growth was recorded in the first quarter of this year, with the rate of growth strengthening to just over 1 per cent. This is the second successive quarter of growth since the contraction began in 2008. Partially owing to this, the unemployment rate decreased to 13.7 per cent in the quarter, having fallen from a peak of 15.1 per cent in the first quarter of 2012, while the seasonally adjusted number of unemployed declined to below 300,000 for the first quarter since early 2010.
However, despite the considerable progress being made, I would emphasise that I am under no illusions about the scale of the challenges that remain and further measures are needed if we are to build on these gains. Reflecting this, the Action Plan for Jobs 2013 set out over 333 actions to be undertaken in the coming year to support job creation and complement measures already untaken in the Jobs Initiative and the Pathways to Work.
Conclusion
In conclusion, I would like to thank you again for the opportunity to speak to you this morning. Myself and my Department look forward to the continuation of our co-operation with the funds industry and to the future success of this important sector. I wish you an enjoyable and informative day.