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New year, new outlook Back  
As we begin the new year, it is an appropriate time to look forward and examine what 2003 may bring.
New year, new outlook
As we begin the new year, it is an appropriate time to look forward and examine what 2003 may bring.

The Irish financial services regulatory environment is to change significantly during 2003, with the introduction of the single regulator, the Irish Financial Services Regulatory Authority (IFSRA).
While the project has taken longer than initially expected to get to this stage, and the issue of funding by the industry has still not been finalised, the appointment of Dr. Liam O’Reilly as chief executive of the new Authority late last year should mean that the Authority will be up and running sometime in the first half of 2003.
While it remains to be seen how the new regulator will work out, expectations are high that it will continue the Central Bank’s co-operative approach to regulation, and will maintain Ireland’s reputation as a well-regulated financial centre.
Another regulatory development, which has been postponed on several occasions, is the new Basel Capital Accord. With a new deadline for implementation of 2006, banks’ preparations should step up a gear during 2003, as the Bank of International Settlements expects to finalise the Accord in the fourth quarter of 2003.

As we head into the fourth year of a bear market, the inevitable question must be asked. Have we reached the bottom?
While commentators have predicted a recovery on several occasions over the past couple of years, markets improved only to fall again. The outlook is now, ironically, more positive than it has been at any juncture to this point. That may seem like a statement of the obvious, and it is. But obvious facts and common sense are at the core of market movements in the long run. The adjustment going on now is in the main a correction of the ‘irrational exuberance’ (as coined by Alan Greenspan, not as you may imagine in the late 1990s, but in 1996 when the bull market of the late 1990s was in its early stages) that took place in the 1990s, and that correction probably still has a little way to go. With much of this exuberance gone from the markets, stock prices going forward will reflect actual, not potential, corporate earnings.
With no new companies listing on the Irish Stock Exchange in 2002, the immediate outlook does not look any brighter, with no obvious candidates emerging as likely successors to the companies that departed the ISE in 2002 such as Jefferson Smurfit. Indeed it is forecast that several other small-cap Irish stocks may also exit the ISE on a management buy-out ticket.

While new securitisation issues were few on the ground with only Friends First and Anglo Irish going to market last year, the market as a whole continued to strengthen with 361 securitisations listed on the Irish Stock Exchange as of November 2002. Writing on page 12, Patrick Molloy, a partner with Matheson Ormsby Prentice says that 2003 should see more transactions which involve Irish assets coming to the market, and he also expects to see the first issuance of an Irish covered bond also in 2003.
2003 should also see the securitisation regulatory environment further enhanced with the updating of Section 110 in the forthcoming Finance Bill.

The insurance sector was very much in the news during 2002 with soaring insurance premiums blamed for many company closures over the year. Writing on page 6, Paul Donaldson, chief executive of Royal Sun & Alliance, says that while the past year was very difficult for the non-life sector, 2003 should mark the start of a more stable insurance environment going forward. However, Donaldson says that the industry must focus more effort into better educating the masses about the value and benefits of insurance and improve the detection and exposure of fraudulent activity.

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