Luxembourg has claimed a legal right to grab the European Banking Authority for itself after Brexit, despite pitches from Ireland and other states to host the EU institution.
Dublin’s ability to lure financial firms post Brexit got a much-needed boost yesterday after the Royal London Mutual Insurance Society picked Ireland as its future EU base, and with JP Morgan now poised to expand its presence here as a result of Brexit.
It’s a turnaround after Lloyd’s of London, the iconic UK insurer, gave Dublin the swerve in favour of Brussels.
As this newspaper reported yesterday, JP Morgan is considering taking enough new office space to house 1,000 employees in Dublin’s Capital Dock, close to the IFSC.
But the good news was offset by a ratcheting up of competitive tension from Luxembourg in the high-stakes battle to host the London-based European Banking Authority (EBA).
Luxembourg has claimed a legal right to host the EBA under an obscure ruling dating to the 1960s. The EBA must relocate its 159 London employees from the Canary Wharf financial district in the wake of Brexit.
The EBA’s new location must be decided by the European Commission, unless Luxembourg’s claimed automatic entitlement is upheld.
Dublin and other European financial services centres have been jostling for London’s mantle as a global financial centre since the shock referendum result last summer.But the race has heated-up since British Prime Minister Theresa May formally triggered divorce proceedings with the bloc.
In the past two days a wave of companies have signalled their intentions to open subsidiaries in the single market.
Royal London’s decision will see it turn its Irish arm into a licensed European subsidiary.
US giant Citi told London staff yesterday it won’t hang around while Brexit talks happen to decide the future for thousands of its workers.
In a memorandum to staff, Jim Cowles, the bank’s head for Europe, the Middle East and Africa, said “banks can’t wait two years or more for a deal to be struck on passporting or equivalence”.
The scramble to host the EBA also intensified.
Luxembourg’s Prime Minister Xavier Bettel threw down the gauntlet to competing centres by claiming its campaign for the agency was rooted in a decision taken by European leaders in 1965. The assertion was conveyed in a letter to the EU Council President Donald Tusk and European Commission head Jean-Claude Juncker.
In January, Taoiseach Enda Kenny described Dublin as an “ideal” base for the EBA.
In a statement last night, the Department of Finance stressed the Government had been “active” in pursuing the right to host the EBA.
The agency is responsible for harmonising banking supervision across member states and is best known for its ‘stress testing’ measures – a key plank in the EU’s attempt to restore faith in the region’s banking system after the financial crisis.
A spokesperson for the department said Financial Services Minister Eoghan Murphy “recently raised our bid at a meeting with the European Commission Vice President Dombrovskis” and added that “officials have also raised the bid at meetings with EBA and with European Commission officials”.
He said Dublin, as an English-speaking and well-established financial services centre, represented “the least disruptive option for the EBA relocation”.
The renewed push for the EBA comes after Mr Murphy raised concerns about the risks of a regulatory race to the bottom. That was after US-based insurer AIG opted to relocate its new European hub in Luxembourg, despite Ireland earlier being in the running for the investment.
In a meeting with the EC earlier this month, Mr Murphy warned against regulatory arbitrage. According to a spokesperson for the minister, he pressed the case for “consistency across EU member states in the application of European and member state regulatory standards for financial services”.
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