Ireland’s central bank governor said banks have already begun exploring the possibility of moving activities to Dublin following Britain’s vote to leave the European Union, which may jeopardise London’s right to sell financial services across Europe.
“There has to be some level of relocation depending on how the Brexit negotiations go,” Philip Lane said in an interview with Bloomberg Television in New York. “The most important point for now is that it’s way too early to tell. Institutions aren’t in decision-making mode yet, they are essentially doing research. ”
Ireland is seen as one of the favoured destinations for financial firms based in Britain that want to retain so-called “passporting” rights which allow them to do business within the EU. Many banking functions are jointly supervised by the European Central Bank and the local regulator, Lane said.
“If new business comes along we will be able to staff up to deal with it,” Lane said.
While no firms have moved operations to Ireland yet, “more of the action at this point is vis-a-vis law firms and consultants” which advise banks on their how to handle the Brexit fallout, Lane said.
It will be some time before the full ramifications of Brexit are known, Lane said. “The UK has to decide what it’s asking for and the EU has to respond to that request,” Lane said. Ireland wants a “win-win” relationship between the UK and EU, he added.
While the Irish economy has recovered strongly, Lane said the government had to remain cautious in its outlook.
“The recovery has been a genuine one but there is still a long way to go and a lot of debt in the system,” he said. “There is nothing on the horizon now to say that there will be a significant reversal but we know Ireland is a small open economy.”
“We have to recognise there are scenarios where that can go into reverse.”