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Looking ahead to 2004
While Budget 2004 did not produce any surprises, and was declared as ‘boring’ in some quarters, Minister of Finance, Charlie McCreevy should be applauded for the steady approach he took to guiding the country’s economic future.

Unlike in other Budgets, such as last year’s, which produced outrage amongst the financial services sector due to the imposition of the €300 million levy on the banking industry, Budget 2004 did not elicit any such response, and was welcomed by the financial servies industry.

Indeed, this issue’s Tax Monitor says that it was a, ‘thoughtful well-crafted budget that addresses the economic health of the country from a long-term perspective’.

One of the industry’s key requests was the introduction of a holding company regime, as it was felt that Ireland was losing out on key business due to the attractiveness of establishing a headquarters or holding company in other jurisdictions, and this request was granted. It is now hoped that companies with existing bases in Ireland, may consider moving their HQ over, or that new companies can be persuaded to make Ireland their main base.

However, not all of the industry’s recommendations were taken on board, as the Government failed to address the issue of ring-fencing in the leasing sector. It remains to be seen whether this will be included in the Finance Bill, but indications are that it will not.

2003 was a watershed year for regulation of the financial services industry, with the introduction of the single regulator, the Irish Financial Services Authority (IFSRA), and a number of new regulations, coming from both the IFSRA and the EU. These regulations, most notably the Companies (Auditing & Accounting) Bill, caused much consternation amongst the industry, and the fear of over-regulation has been raised on numerous occasions (not least in FINANCE) over the past number of months.

Speaking at the annual Financial Services Ireland members’ dinner, Willie Slattery, chairman of the industry association, expressed concern over the issue and said, ‘there is a palpable sense of unease within the financial sector in Ireland about what is becoming an over-regulated business environment’. (See page 3). Calling for ‘smart, ethical, effective, responsive and competitive regulation’ Slattery said the original draft of the Companies Bill did not meet these requirements.

The Tanaiste Mary Harney, also spoke at the dinner, and in a reply to Slattery’s concern, made the point that the most regulated economy in the world, and one of the most successful is that of the United States. While this fact was disputed by some of the industry attendees, the Tanaiste may have been referring to the role of good corporate governance and trust, and sound financial institutions.

The issue of over-regulation will again come to the fore as the Companies Bill makes its final journey through the Seanad in the New Year, and the second IFSRA Bill is published. This Bill will set out how the new regulator will be funded, and is anxiously awaited by the industry. It is essential that amidst all this talk of over-regulation and falling competitiveness that nothing in this Bill damages Ireland’s reputation as a financial services centre.

While there may be a mis-match between the Government’s, and the industry’s understanding, of ‘good’ regulation, it is important that there is a meeting of minds between both on this issue, and FINANCE hopes to progress this debate in the next issue.

The current year has not been the easiest, and one sector that has felt this is recruitment, and in a survey conducted by FINANCE and published on page 16, some recruiters report that their business is down almost 40 per cent on last year.

However, the recruiters feel that the outlook is brighter for 2004, and growth in financial services recruitment will begin to take off, boosted by sectors such as funds and insurance.

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