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Fifteen historic years - and what next can we expect? Back  
Ken O’Brien introduces our review and outlook of the years 1987-2002.
Fifteen years ago, Finance started off with the mission that it would be a magazine designed to provide a forum for ideas for the financial services industry, and for the facilitation of the emergence of a better skilled finance sector in Ireland.

We would not claim that we were original in publishing many of the exciting ideas that had begun to come to the fore at the time - London had begun to emerge as a ‘eurodollar’ centre in the 1960s - Bermuda, as an offshore centre (for captive insurance) well before that - and of course the US, where innovation’s roots were most firmly established, even before the Second World War.

Neither would we claim to be original in promoting the idea that Ireland could be an international financial centre of note, or that its domestic financial services industry could develop the sophistication it now has. The Financial Services Industry Association - based on the original idea of financial services as a unified industry, bringing together diverse areas such as insurance, stockbroking, building societies all together in one sector came into being, before Finance. The IDA actually established a prototype marketing unit for ‘financial services’ and ‘software’ (a term that was familiar to very few at the time), as long ago as the early 1970s.

What we would claim originality for is the idea of publishing these ideas under the banner of the idea set out in the first paragraph above. We also promoted the view that financial managers and corporate treasurers in industry generally - ‘the corporates’ were an integral part of the Irish financial services sector.

There were those who did not share the vision - for most of the 1990s, the IFSC was regularly described as a ‘white elephant’, for example. Thankfully, the doubters were in the minority, and thankfully, Ireland’s politicians and senior public servants picked up the vision of Ireland as a financial centre, and of financial services as being a beneficial industry to foster. It had many strengths such as centuries-long established banking institutions, and professions and professional institutions in banking, finance, accountancy and law of long standing. (A perusal of how employment has grown in many of our financial and professional institutions in the fifteen years between 1987 and now shows, though, how explosive and historically unprecedented the growth in the industry has been in the past fifteen years compared with what had gone before).
The vision of a renewal of the industry and the emergence of an international industry based in Ireland was quickly picked up by the industry itself naturally, as can be seen from the stories told by many of the writers in this month’s edition.

Nowadays, as is clear from a review of the past fifteen years, the sector has advanced in sophistication. So much so that the prevailing Governmental view of the finance sector is that it should be left alone to thrive as it sees fit, rather than needing positive promotion by Government.
Most financial services industry leaders would accept that view. After all, they are not a state industry, and therefore they must pay their way and not be a burden on the taxpayer.

The industry has a proud record in that account. It never sought nor received grants. It directly employs over 50,000 people (over 10,000 of whom are in IFSC companies). Its contribution to tax revenues is dwarfed in importance to Ireland’s Exchequer only by the computer sector.
Neither does it enjoy particular privileges, nor should it. In the years to come any moves at Government level to encourage competition in the financial and professional financial services sectors should be welcomed by the industry as in its own and its clients’ best interest.

This continued drive on the part of policymakers to develop competition - the case of the airlines and the taxi industry are good examples of success in the 1990s - should be encouraged in any way that it impinges on the financial services industry. Yet, in doing so legislators must also be careful not to overregulate. This is a particular danger for the financial services industry, and if there is too much or bad regulation, industry will go elsewhere. It is notable that a theme emerges in several of the articles in this issue that a negative over-regulation trend is identified - for example in private client stockbroking services, pensions, and indeed in a number of other sectors, as Paul McGowan says, for example, in his contribution.

This is one of the potential problems. Another is the risk that the public finances might be allowed to slip. An even bigger threat is that Ireland will again vote ‘no’ to Nice.

But, assuming these dangers are avoided by the collective common sense of both the Irish people and the Government they recently elected, there are grounds for even greater optimism than prevailed in 1987.

The positive factors include:
• a vastly improved skill pool in the financial services industry (the labour force is both ‘wider’ and ‘deeper’). Alongside these are greatly advanced management skills;
• the euro - in 2002 the Irish harp adorns a global currency - fifteen years ago, much as we may have loved our Irish pound, the Irish money and capital markets were pretty primitive by comparison. This global currency has meant a permanent reduction in interest rates. In turn this has led to better credit quality (a point referred to by AIB’s Michael Buckley in his article), and in consequence, this means a stronger financial services industry than was the case fifteen years ago;
• alongside the euro in importance is the certain progress towards (and possible completion) of the single European market in financial services over the next fifteen years. Ireland as the only English speaking country in the euro zone and as one of two in the EU can continue to capitalise on its unique position in this respect, for example as a base for North American and Asian financial institutions targeting the European market.

So, what will the future hold?
The articles published in this edition, pretty certainly will be shown to be prophetic in many respects when they are looked at again in fifteen years’ time. So, to start with, we would commend them to readers as a guide to the future as well as a reminder of the past.
A review of the articles prompts us also to make the following predictions:
• the degree of consolidation in almost every sector surveyed is notable over the past fifteen years. We can expect a continued trend of consolidation - not so much in the first rank of many sectors, such as accountancy, but in the second rank. In sectors where consolidation has not been marked in the past fifteen years, expect it to pick up in the next fifteen - the Irish legal services sector, for example, is one which may well mirror the degree of change seen in accountancy in the past fifteen years;
* alongside consolidation however, also expect evolution of new, niche, sectors and differentiated operations (initially ‘boutiques’). The past fifteen years has seen many such examples, Merrion Stockbrokers, Life Strategies, Trinity Fund Administration, Caradas, Corporate Finance Ireland, Dolmen, being some examples;
• the European financial services market will become the playing field for the industry, and this offers, of course, huge opportunities;
• the continued survival of the euro as a low interest rate global currency, will continue to underpin the Irish financial services industry and its institutions;
• the emergence of growing financing needs in both the public arena (financed, for example, by PPPs), and new innovative forms of finance by the private sector - expect to see the continued importance of securitisation and bond issuance - will see the finance sector in Ireland come into its own in a way only hinted at in the years since 1987.

The future is definitely exciting, especially when we consider the events of the past fifteen. Irish Life & Permanent’s David Went in his review of the period commented ‘its only when you pause to look back that you appreciate how far you’ve come’. The thought that there is every chance that we will be able to say the same in fifteen years is encouraging.

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