Ed Sibley, deputy governor for prudential regulation at the Central Bank of Ireland (CBI), provided the industry with an update on the regulator's Brexit preparations at a conference this week. In a speech, he told the Banking and Payments Federation Ireland (BPFI) that while the prospect of the UK exiting the EU without a formal withdrawal agreement in place presented some short-term risks to Irish financial stability, these risks were, in the regulator's view, "manageable".
"The Irish banking system is considerably more resilient than it was, and the most significant firms operating in Ireland across all sectors have, in line with our requirements, prepared and are executing contingency plans for a 'hard Brexit'," he told the conference. "That is not to say that a hard Brexit will not be bumpy for the economy, and disruptive for the financial system, but that it is resilient enough to withstand these bumps."
Sibley said that the CBI had worked with regulators in the UK and EU to ensure that firms providing services to Irish consumers would be able to continue to do so if there was no deal. In particular, the Department of Finance has tabled emergency legislation for a temporary 'run-off' regime for insurance contracts, which will give insurers and brokers based in the UK or Gibraltar that have not put their own contingencies in place a time-limited period in which to wind up existing business.
The run-off regime set out in the draft legislation would run for three years, and would not allow firms to write new business or renew existing policies, Sibley said. He also warned that Irish consumers may see less choice when shopping for 'niche' insurance products, which are often underwritten by UK-based insurers, or be unable to obtain this type of coverage altogether.
Elsewhere in his speech, Sibley said that the CBI was "delivering a proportionate, efficient, effective authorisation process" for UK firms seeking authorisation in Ireland as a result of Brexit; which was "in line with European regulatory norms".
Dublin-based investment funds expert Gayle Bowen of Pinsent Masons, the law firm behind Out-Law.com, said that Sibley's comments would be welcomed by firms.
"Now that a no-deal Brexit is becoming more of a reality, this statement by the Central Bank of Ireland provides much needed comfort and clarity to both the asset management and insurance industries and also to investors, and will ensure that we are not facing a cliff edge departure that would potentially destabilise the UK and EU financial markets," she said.
Insurance and wealth management expert Tobin Ashby of Pinsent Masons said that the temporary run-off regime proposed by the CBI was a "pragmatic" measure.
"The continued uncertainty over the direction of Brexit is proving difficult for insurers with relatively small numbers of customers in other jurisdictions in the EU as the wholesale restructuring of a transfer of business to a new subsidiary is hard to justify - and yet, for individual customers, it would clearly be a significant problem to lose their insurance on the day of Brexit," he said.
"This kind of pragmatic measure from the Irish legislator will therefore no doubt be welcomed by insurers and customers alike to alleviate the consequences of a no-deal Brexit which is still such a realistic possibility," he said.