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Saturday, 27th April 2024 |
| The Irish experience of an international bank - Depfa's Irish story |
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| Michael Deeny looks back on thirteen years of Depfa Bank’s presence in Dublin, which has seen the bank headquarter its operations in Ireland, grow its local work force to 250 people, its asset base to €229 billion, and become very active in the nascent Irish covered bond market. Dublin’s financial centre has experienced similar growth rates during this time, and is 'now very definitely on the world financial map’. |
The early years
DEPFA has had a presence in Ireland since 1993 in the form of a wholly-owned subsidiary DePfa-Bank Europe plc (DBE). DBE was specifically tasked with the development of DEPFA's non-German public sector financing activities worldwide.
Dublin’s IFSC was chosen as the location for DBE for a number of reasons, including:
o The availability of highly qualified personnel
o Approachable and responsive regulatory authorities
o A favorable fiscal environment
o A stable political and legal environment
o The only English-speaking country in the euro-zone and the same time zone as London
o A relatively low cost base
DBE experienced a very rapid rate of growth in the early years following its establishment. A key factor was that, from an early stage, the Dublin-based management team was allowed a high level of autonomy and had the authority and ability to make rapid decisions by virtue of a Dublin-based credit analysis department and credit committee.
New developments
Towards the end of the 1990s, two major initiatives were to have significant future implications for DEPFA in Ireland.
The first concerned the introduction of Irish covered bond legislation. DEPFA has for many years been a major player in the German covered bond ‘pfandbrief’ market and was involved in the project to consider and make proposals to the Irish Government for the establishment of Irish covered bond legislation. Spearheaded by Irish Banking Federation (IBF), the project involved a wide range of stakeholders, including:
o Financial institutions
o Department of Finance
o Financial Regulator
o National Treasury Management Agency
o Industrial Development Authority
The result was the enactment of the Asset Covered Securities (ACS) Act 2001. This legislation has enabled DEPFA to issue over €40 billion of ACS to date. The market now consists of four issuing banks, the others being WestLB Covered Bond Bank, AIB and Bank of Ireland. The total value of Irish ACS currently in issue exceeds €60 billion.
The second important initiative was a proposal to split the DEPFA BANK Group into two separate banks, along the two core business lines of the Group: namely, real estate finance and public sector finance. At the time, the DEPFA BANK Group was headquartered in Wiesbaden, Germany. The split was finalised in 2001, with the establishment of a real estate bank - now called Aareal Bank AG - and a separate bank called DEPFA BANK plc. The public finance bank retained the name and brand of DEPFA BANK.
The successful experience of DEPFA in Ireland since 1993, and the introduction of the Irish ACS legislation prompted the idea of establishing the Headquarters of the new public finance bank in Dublin. This was completed in 2001 and was a vote of confidence in Ireland. There are not many financial institutions that transfer their Headquarters to another country.
Today, DEPFA employs over 260 people in Dublin and more than 500 people worldwide. It focuses exclusively on the provision of financial services to the public sector worldwide, including a growing level of business in Ireland. The rate of expansion continues, with total assets at the end of 2005 totalling €229 billion. DEPFA is regulated by the Financial Regulator.
The Irish story
DEPFA is a truly international group with a worldwide presence, headquartered in Ireland. The group has offices located in 13 countries worldwide, with new offices about to open in two other countries.
DEPFA is proud of the Irish chapter of its history. The bank has been involved in the IFSC almost since its inception, and has participated in the tremendous growth in the Irish financial services sector over the last years. Dublin is now very definitely on the world financial map, with many of our customers worldwide interested in why DEPFA is now headquartered in Dublin and asking how the success of the IFSC and Ireland’s financial sector in general has been achieved.
While in the past the favourable fiscal environment may have been one of the primary drivers for foreign companies, it is now clear that the IFSC and indeed Ireland as a location has moved on and up the value chain. DEPFA is not alone in investing heavily in the IFSC. This is evidenced by many successful organisations on the banking side such as Citibank and Merrill Lynch and innumerable other successes in areas such as funds, insurance, leasing, securitisation, structured finance and corporate treasury management. By 2005 the IFSC alone provided over 19,000 mainly highly-skilled jobs and contributed over €800 million in corporation tax. The figures for the financial sector as a whole would be much higher.
DEPFA has put down roots in Ireland, building close relationships with organisations such as Concern, Trinity College and the Royal Irish Academy. More recently, the bank has led a project to establish an International School in Dublin, which is scheduled to open in September 2007.
Building on success
From DEPFA's point of view one of the advantages that Ireland offers is the open and frank communication lines existing between stakeholders such as the Government, the Financial Regulator, industry and industry associations, and a willingness on all sides to be practical and responsive.
The value of this has been evidenced at both domestic and international levels. For example, the ACS legislation will shortly be updated by Government following a detailed review process involving all stakeholders. At European level, the new European Capital Requirements Directive comes into force on 1 January 2007. The initial draft of the Directive in 2004 was prejudicial to the business models of many Irish and European banking institutions, including DEPFA. An extensive communication process was launched by Ireland at European level involving DEPFA and other industry participants, the Department of Finance, the Financial Regulator, Irish MEPs, Irish Permanent Representatives to Europe and co-ordinated by Irish Banking Federation.
The process was ultimately successful in obtaining necessary changes to the Directive. This was due in large part to the ability of ‘Ireland Inc.’ to react quickly and in a concerted manner. This was in direct contrast to a number of other European jurisdictions who eventually came to rely on Ireland’s leadership role in this process.
The continued success of the Irish international financial services sector will be heavily dependent on two important factors. First, the lines of communication mentioned above will need to be maintained and further developed. Secondly, the Government has already shown its commitment by its recent launch of the Building on Success document outlining its strategy for the sector, and developing on previous documents including the 2004 report issued by IDA Ireland/Deloitte.
This was a very welcome development. The objectives identified in the /Building on Success/ document will be crucial in ensuring the future success of the sector. Priority must now be given on all sides to devoting the necessary resources to the delivery of those objectives. |
Michael Deeny is managing director of DEPFA ACS BANK and incoming chairman of the Federation of International Banks in Ireland (FIBI).
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| Article appeared in the January 2007 issue.
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