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Home » Daily Briefing » Daily briefing - 20 March 2017

Daily briefing - 20 March 2017

Breaking: Theresa May's government will trigger Article 50 on March 29

The new Central Bank building in Dublin

Brexit stress is beginning to prise apart factions inside Irish finance, with further stories appearing in the Irish press this weekend briefing that the Central Bank of Ireland is now set against bringing any bank to Ireland with more than 500 jobs. The Sunday Business Post [paywall] this weekend repeats stories suggesting that the arrival of banks with upwards of 1,000 jobs will overwhelm the central bank, which is in the process of moving to a new building along the Liffey waterfront where it will survey an area now bursting with finance and technology businesses. The central bank also appears to be suggesting that part of the issue with bringing thousands of bankers to Dublin is that well-paid bankers will force up already soaring rental prices in the city centre, at a time when the capital is suffering a homelessness crisis. Office space in the city centre is also now at a premium, and Lafferty News understands that international banks have turned up their noses at relocating to locations elsewhere in the country.

However, this news comes as Facebook and Google announce plans to boost their Dublin workforces. We reminded readers recently that last October Facebook was issued an e-payments licence by the Irish central bank, which it will use to run a money remittance and payments business across the EU27. It will not have escaped the notice of Irish financial authorities that there is a major regulatory swing happening in the United States, with the Office of the Comptroller of the Currency recently issuing new guidelines on providing banking licences for fintech businesses. Among these, we expect Facebook, Google, Apple and Amazon, among others, to look at developing payments and banking businesses. Expect to see many provocative stories along the lines of Chris Skinner's 'Will Apple Bank be the first new American fintech bank?' Could it be that Irish authorities have taken a deliberate stance to foster tech/finance companies while turning away established players?

Since establishing an international financial centre by the Liffey in the 1980s, Dublin's financial industry has boomed and busted, earning a reputation during the first decade of the second millennium as a 'Wild West of Finance'. The central bank is still smarting from the financial crisis and, despite an increase in supervision, seems determined to not get stuck with an influx of businesses with big balance sheet risks. That strategy isn't entirely working, and a Bloomberg story this weekend suggest that Irish authorities still haven't managed to deal with unregulated entities. "Ireland is one of the world's hubs for [Special Purpose Vehicles (SPVs)], entities typically with no employees that offer tax and regulatory benefits to the corporations using them," according to Bloomberg. "The Central Bank of Ireland began amassing data on SPVs in late 2015 as part of a global push to better understand the risks posed by non-bank financial firms, or shadow banks....The regulator found hundreds of entities with €324 billion of assets, including about €54 billion in Russia, according to an October report." That's about the same amount of assets as these SPVs have in the United States, which is one of Ireland's major trading partners. "'Why is a Russian bank in the middle of nowhere raising dollars through an Irish SPV using brokerages in Hong Kong?' [asks] Shaen Corbet, a finance professor at Dublin City University. 'Ireland says it's locked down on this kind of stuff, but it hasn't really.'" More to come on this story in the coming days.

Cryptocurrencies are hoovering up investment from global banks, keen to get in on the several alternatives emerging to support international money transfer while also warding off competition from startups such as TransferWise. "With 15 percent of banks planning to implement full-scale commercial blockchains this year, an army of competitors to Ripple is rising up," according to Bloomberg. "These rivals include financial-industry veterans like Visa and upstarts such as MonetaGo and the Enterprise Ethereum Alliance, which includes JPMorgan Chase." Much of the interest is in what kind of standard will emerge. Swift, the current standard, is exploring a big leap in its technology. "Involving more than 90 banks, [Swift's innovation] allows for same-day use of funds, transparency of fees, and other features customers have long asked for. Earlier this year, Swift also began testing using the blockchain from the Hyperledger consortium. Hyperledger has an advantage over Ripple because it doesn't focus just on cross-border payments, but can help banks modernize many parts of their businesses, said Brian Behlendorf, executive director of Hyperledger."

The cashless system "did not catch on" in India....
....but it is catching on in Australia
Nigerian central bank head urges cooperation on monetary and fiscal policy

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