Ladies and Gentlemen
Good morning
FIBI Background
I am delighted to be here this morning in the National Convention Centre to give the opening address for this "Positioning for Growth" annual conference of the Federation of International Banks in Ireland (FIBI).
I am aware that as the voice of the international banking sector in Ireland FIBI membership comprises over 50 international banking operations in Ireland. It is testament to the diversity of the international financial services operations in Ireland – from corporate and investment banking to leasing and asset finance.
I want to make it clear today that this Government welcomes the presence of so many international banks in Ireland.
We welcome your presence here because, international banking is, and will continue to be, a very important industry for Ireland.
The international banking industry brings to Ireland high value jobs. IFSC companies employ more than 25,000 people in Ireland. Some 40% of this employment is accounted for by banks alone. I was delighted to learn that overall employment increased in the IFSC in 2010 for the first time in three years.
You contribute to the cost of public services. In 2010 IFSC companies accounted for 16% of overall corporate tax receipts.
You integrate Ireland and Irish companies into the global economy through trade and investment flows. Ireland is now the fifth-largest exporter of financial services in the world, with exports still growing strongly in these difficult times. The IFSC accounts for 27% of services exports from Ireland. This makes the IFSC a key contributor to Ireland’s balance of trade with a trade surplus of over €7 billion in the twelve months ending September 2011.
And I know many people working in the industry that make important contributions to Ireland’s arts and culture, to our educational institutions, to our local communities and to our sporting bodies.
This conference brings together the leading practitioners and stakeholders from the international and domestic banking and financial sectors to address the significant challenges that are faced in the form of continued uncertainty in the financial markets, to discuss new regulatory requirements and to consider the growth opportunities that now exist.Restoring Ireland’s International Reputation
The theme of this conference "Positioning for Growth" is an important one, and the right one.
I recognise that the most important contribution that my Government can make to the growth of the international banking industry in Ireland is to restore this country’s reputation as a committed EU member with a stable, trusted and predictable political, financial and regulatory system and a competitive, dynamic and entrepreneurial economy.
In a context of the scarce resources and chaotic financial situation that the new Government inherited, we agreed to prioritise from the very beginning delivery of those actions needed to stabilise the economy and our finances, to restore Ireland’s international reputation and to improve lines of foreign investment.
After just over a year in office, we are making progress.
We have delivered on every aspect of our IMF-EU Programme of Support, and now enjoy a strong relationship of trust with our funding partners that allows us to enhance the Programme on an ongoing basis to put a greater focus on jobs and growth.
We have exceeded our Government deficit reduction targets in 2011, while avoiding any increase in income or corporation taxes that would have damaged our competitiveness and growth prospects. This has resulted in yields on Irish benchmark bonds falling by more than half over the last nine months.
We have recapitalised, downsized and stabilised the domestic banking system - at half the original estimated cost to the Irish taxpayer. We welcomed new private investment into Bank of Ireland, and remain committed to returning the other banks to private ownership.
And for the last five months running, we have witnessed a net inflow of deposits back into the Irish banking system, resulting in a greater than expected fall in our banking system’s reliance on central bank financing over the course of the last year.
We are in the process of overhauling archaic structures in the regulation of key professions and industries in Ireland with the aim of securing further tangible reductions in the cost of living and doing business in Ireland.
We have overhauled our financial regulatory structures and laws to meet best international practice and to restore Ireland’s reputation as a safe and trusted location from which to manage savings and make investments. And we have overhauled the senior management and boards of the domestic Irish banks to help restore confidence and trust in both the public and international markets.
While the impact of these measures on the real economy and at the local level will take time, the evidence on the ground is that Ireland is now facing the in the right direction.
The improved international confidence in Ireland’s economy is reflected in the strong lines of inward foreign investment, as evidenced by the recent announcements by PayPal, Microsoft and others.
IDA Ireland reported its best results last year for over a decade and a strong pipeline of new projects for the year ahead.
The economy returned to growth in 2011 for the first time in four years, with exports of goods and services reaching new highs.
Our balance of payments has returned to surplus for the first time in over a decade, allowing Ireland to pay down the debts built up during the property bubble.
While unemployment and emigration remain unacceptably high, the numbers of people at work increased – on a seasonally adjusted basis - in the final quarter of last year for the first time since 2007.IFSC Activities and Challenges
Banks have contributed in a very significant way to Ireland’s economic crisis. Twin failures, to run banks properly, and to regulate them properly, have cost this country dearly.
But I want banks – both domestic and international – to also play a key role in our economic recovery. As I have said on a number of occasions to our domestic players, I want banks to become part of the solution to our economic challenges rather than part of the problem.
That is why in July 2011, I had the pleasure of launching the Strategy for the International Financial Services Industry in Ireland 2011-2016, setting a target of growing employment in the sector by 10,000 over 5 years.
The strategy was developed on the basis of extensive analysis and consultation carried out across the full range of international financial services.
The target is ambitious and challenging. But less than 12 years ago, the IFSC employed only 8,500 people; it now employs 33,000. We are building from a position of far greater strength than we were then.
The Strategy is not just a Government strategy – it is co-owned by the industry and the Government together. I have said it many times – the Government’s role is not to create jobs directly, it is to create the environment that allows others to create jobs. The engine of growth is and will remain the private sector.
The Government has made significant steps in fulfilling its own commitments under the Strategy.
The 2012 Finance Bill brought a package of changes for the International Financial Services Sector designed to make business easier to do here. One such change, the Special Assignee Relief Programme (SARP) will enhance and support the competitive position of the international financial services sector in Ireland.
And the Government has protected the competitive position of Ireland through our steadfast position on Corporation Tax, and more recently, on the proposed Financial Transaction Tax.
It makes little sense for the EU alone – and even less so for the eurozone alone - to move ahead of the rest of the world with a new tax on financial transactions that will simply divert high value-added jobs and businesses to non-European locations. In our struggle to recover from the crisis, that would be a shameful own goal.
Ireland has to play to its strengths and ongoing work to better exploit new opportunities.
One area we are expanding into is Islamic Finance. Ireland has recognised its importance in the global financial system through adapting our tax system and financial regulatory system to ensure a level playing field between Islamic Finance and conventional measures. In addition, Ireland has been active in concluding double taxation agreements with important Islamic States, including recently Saudi Arabia, Bahrain, Kuwait and the UAE. We are determined to ensure that the IFSC is a Centre of Excellence for Islamic Finance and the changes in recent Finance Acts will support its development. The Central Bank of Ireland has already authorised a number of Sharia compliant funds.
Another area where we see significant potential for growth for the Irish financial sector is the green economy.
The strategy commits to developing Ireland as a centre of excellence in green finance through the Green IFSC initiative which is being coordinated by my Department through the IFSC Clearing House Group and in conjunction with industry.
On Monday last in New York the Green IFSC's Global Green Asset Management Network was launched thereby taking a further step forward towards achieving that goal.
Irish green asset management and green enterprise firms are active all over the globe from China to Chile and Ireland to Africa and, with $10 billion in green assets managed or serviced, Ireland is already emerging as a world leader in green finance. The establishment of this network can only serve to accelerate the continued growth and copper-fasten Ireland’s growing reputation in this sector.Responsible and Responsive Regulation
The strategy also recognises and fully supports the critical importance of a credible, responsible, responsive and proportionate regulatory system whose own capacity and reputation provides, in itself, a source of competitive advantage for this jurisdiction, attracting reputable, responsible and sustainable financial services activity.
I want to commend the Central Bank of Ireland and the industry for working together in recent years to restore international confidence in the quality of Ireland’s regulatory structures and practices.
It is a source of great comfort to me that there have been few, if any, problems relating to the activities and management of the international banking and wider financial services industry in Ireland.
I also recognise that we cannot eliminate risk from the financial system – nor, in truth, do we want to. With innovation and change in any industry comes some element of risk.
I know "innovation" has become a suspect concept in the financial services industry, because of the role played in the crisis by some new complex financial products.
But without risk, and without financial innovation, we cannot create a new future.
It is vital that the next generation of innovations from the financial sector are seen as having played a key role in recovery, jobs and the creation of new industries, and that financial institutions in Ireland are at the centre of these developments.Conclusion
In conclusion, I want to thanks the members of FIBI for the invitation to talk to you here today, and to make it clear that the Government wants to see a healthy and thriving international banking sector in Ireland.
I’ll finish by saying that there is no better time to invest in Ireland and to be part of our recovery story. This is what I was told US investors this week and what I’ll tell Chinese investors next week.
Ireland is open for business.
Thank you.