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Tuesday, 23rd April 2024
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What IFSRA needs to do to promote financial services Back  
There are golden opportunities for IFSRA to establish itself as the principal theatre of debate on the future regulation of the Irish financial services industry, writes Liam Flynn in this analysis of what IFSRA should do it ensure it is a business friendly regulator to the financial services industry.
Ireland’s recent and impressive success in attracting internationally traded financial services businesses is well known. Ireland cannot, however, rest on its laurels. In more difficult economic times, industry and Government must work harder to continue to attract quality businesses to this country and to maintain those that have already set up here. Continued investment in the future of the Irish financial services industry is essential.

The Central Bank of Ireland (as regulator of the banking and investment funds industries) and the Department of Enterprise Trade & Employment (as regulator of the insurance industry) have historically played an important role in encouraging investment in Ireland through their business friendly approach. The recent establishment by the Government of the Irish Financial Services Regulatory Authority (IFSRA), a single regulatory body for the entire financial services industry, offers an opportunity to re-evaluate Irish regulatory methods and to seek new means by which the regulatory system in Ireland can itself facilitate business activity. This article makes some proposals which IFSRA could adopt should it wish to maintain the role played by the former regulators as a prudent but business friendly regulator of the Irish financial services industry.

Insurance
IFSRA could seek to promote the consolidation, restatement and simplification of Irish financial services legislation. Irish insurance legislation, to take an example, is a complex maze, and has never been consolidated or restated since independence. The earliest statute still in force is the Assurance Companies Act 1909, with legislation then folllowing on a regular basis up to the Insurance Act 2000. There has never been a comprehensive review of the legislation by the Government to establish whether aspects of it are redundant. Large parts of the Insurance Act 1936 (including provisions permitting the Government to operate a reinsurance monopoly!) remain on the statute book even though the reasons for their enactment have long since disappeared. A comprehensive review is called for, and IFSRA may be just the body to undertake or facilitate the task.

Competent professional advisers can of course assist persons seeking to negotiate the legislation. It was just for this reason that we at Matheson Ormsby Prentice produced our recent publication ‘Locating Insurance and Reinsurance Operations in Ireland’ - as a guide to the Irish insurance and reinsurance regulatory system for the potential investor in Ireland. The publication gives a summary of Irish regulation of non-life, life and reinsurance businesses and the requirements for establishing them. It deals with the treatment of captive insurance businesses, and addresses the tax treatment of insurance and reinsurance undertakings under Irish law.

But publications like ours cannot take away the need for a comprehensive review and restatement of the legislation. Government should not be slow to carry out an exercise such as this, and to make parliamentary time available to promote it. It is after all part of the Government’s responsibility to maintain the Irish statute book and to make the law accessible to all citizens.

Staff
IFSRA will no doubt seek to continue to develop its industry expertise and to recruit and retain staff with relevant industry experience and qualifications. Industry does not wish to see high turnover levels of staff at the regulator. Irish insurance regulation under the Department of Enterprise Trade & Employment benefited from great stability, as the Department’s policy was that staff in this specialised area should remain in post for relatively lengthy periods of time. No doubt IFSRA will be mindful of the benefits of maintaining such stability. Industry also wishes to see experienced personnel at the cutting edge.

IFSRA might consider the benefits of a process whereby staff, who review applications for the authorisation of insurers and funds, could spend time on secondment in the industry. The regulator and the industry could benefit greatly from an organised secondment program, operating both to and from the regulator and participating private sector firms. Some of the predecessor regulators to the UK FSA operated secondment programs and the FSA maintained these in its early days. Bodies such as the UK Takeover Panel still operate a much admired secondment system, and industry would be likely to be highly supportive of such a move in Ireland.

Public consultation
Part of IFSRA’s role will inevitably be as a focus for debate on, and a promoter of change in Irish financial services regulatory policy. IFSRA has not yet developed a standard framework for public consultations, and this should be one of its first tasks. The FSA in the UK published a paper seeking views on the conduct of its consultation processes even before its formal establishment. It is to be hoped that, rather than consulting exclusively with industry bodies, IFSRA develops a practice of routinely issuing formal public consultation documents inviting views from any interested party, and that it posts these consultation documents on its website for maximum access.

IFSRA, in conjunction with Government, could act through such a public consultation process as a vehicle for promoting positive developments in Ireland’s financial services regulatory system. For example, the Insurance Mediation Directive is due for implementation in all member states by January 2005. This creates a mechanism by which all member states are required to register insurance intermediaries and to subject them to a licensing regime. An intermediary registered in one member state can then passport services into others. It was such a regime in the EU Life and Non-Life Insurance Directives which attracted so many international life and non-life insurers to Ireland in the first place. But although the Directive was adopted in September 2002, no public Irish consultation process on its implementation has yet commenced. If our implementing law is facilitative, within the limits permitted by the Directive, this could encourage intermediaries to establish in Ireland and passport into other EU member states.

It is important that IFSRA should outline its intended methods of operation in these areas at the outset, as there are golden opportunities for it to establish itself as the principal theatre of debate on the future regulation of the Irish financial services industry. The regulator will no doubt rise to the challenge presented - it can be assured of the support of the industry generally in its efforts to do so.

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