Ireland: Offshore Business Sectors
Since the introduction of the Central Bank Reform Act in October, 2010, bank regulation reverted back to the Central Bank of Ireland. Between 2003 and 2010, the Irish Financial Services Regulatory Authority (IFSR) took over bank regulation from the Central Bank in 2003. The change was more apparent than real, since the IFSR brought together many of the responsibilities previously held by the Central Bank (which continues to form a part of the Authority), the Department of Enterprise, Trade and Employment, the Office of the Director of Consumer Affairs and the Registrar of Friendly Societies. See Law of Offshore for a more detailed treatment of Irish banking legislation as it affects offshore banking operations.
The Central Bank Reform Act, 2010, is now responsible for both central banking and financial regulation. This new structure combines the previous related entities of the Central Bank, the Financial Services Authority and the Financial Regulator.
Banks need licences from the Central Bank, unless they are already authorised in an EU member state under the Second Banking Directive 89/646/EEC, in which case they have to comply with certain administrative and information requirements. A non-EU bank will need to have an Irish subsidiary in order to apply for a license.
In early 2009, in response to the global credit crunch, the Irish government announced its decision after having consulted with the Board of Anglo Irish Bank Corporation plc, to take steps that enabled the bank to be taken into public ownership.
Within a statement the Finance Ministry said: “This decision has been taken after consultation with the Central Bank and the Financial Regulator, which has confirmed that Anglo Irish Bank remains solvent. Anglo Irish Bank is a major financial institution whose viability is of systemic importance to Ireland. Anglo has a balance sheet of some EUR100bn with a substantial deposit base which the State is determined to safeguard. The government has made clear that it will ensure its continued viability. Anglo Irish Bank will continue to trade normally as a going concern, with appropriate government support as necessary. All Anglo employees remain employed by the company.”
“The funding position of the bank has weakened and unacceptable practices that took place within it have caused serious reputational damage to the bank at a time when overall market sentiment towards it was negative. Accordingly the government believes that the recapitalisation is not now the appropriate and effective means to secure its continued viability. Therefore the government must move to the final and decisive step of public ownership.”
“The government believes that the prospects for the institution are solidly underpinned in the new structure, with the benefit of state ownership and a renewed management and Board. In the current circumstances the State is the only available potential owner.
“The recently appointed Chairman of the Board, Mr. Donal O’Connor, will stay on as Chairman. Anglo will be managed on an arms length basis as a commercial entity. A new board will be appointed having regard to the need for appropriate continuity.”
“Shareholder rights will be respected in this process. The relevant legislation outlines a process for determining compensation as appropriate.”
“All customers of Anglo Irish Bank can be assured that the full amount of their deposits and savings are further safeguarded by this action. They can also be assured that they can and should continue transacting with Anglo as normal and there is no need for customers to take any steps as a result of this announcement. Anglo Irish Bank will communicate directly with all customers in the coming days.”
“Creditors (including bondholders) of Anglo Irish Bank can be assured that it will continue to service its obligations and will repay its debts at maturity."
In February 2010, The European Commission announced that it had approved, under EU state aid rules, the establishment of the National Asset Management Agency (NAMA), an impaired asset relief scheme for financial institutions in Ireland.
The Commission said that it was satisfied that the scheme was in line with its guidelines on impaired asset relief for banks that allowed state aid to remedy a serious disturbance in a member state's economy. The scheme helped address the issue of asset quality in the Irish banking system and promoted the return to a normally functioning financial market.
Commenting, Competition Commissioner, Joaquín Almunia, said: "Ireland's financial sector has been one of the most affected by the global financial crisis in Europe and the burst of the Irish real estate bubble has only compounded the problems. This impaired asset measure, which is specifically targeted at real estate assets, is therefore key to cleaning up Irish banks' balance sheets. This is an important step towards the overall restructuring of the sector and its return to a normal and responsible functioning of the market."
The purpose of NAMA is to restore stability to the Irish banking system by allowing participating financial institutions to sell to the agency assets whose declining and uncertain value is preventing the long-term shoring-up of the financial institutions' capital and, therefore, the return to a normally functioning financial market.
The scheme was open to all systemically-important credit institutions established in Ireland, including subsidiaries of foreign banks, with a 60-day application window that expired on February 19. Five institutions participated: Anglo Irish Bank, Allied Irish Bank, Bank of Ireland, Irish Nationwide Building Society and Educational Building Society.
A joint restructuring plan for the Anglo Irish Bank and INBS was approved by the European Commission in June 2011. The business of Irish National Building Society was transferred to Anglo Irish Bank on 1 July 2011 and the combined entity was renamed Irish Bank Resolution Corporation Limited. It will be resolved within the next ten years.
See Offshore Legal and Tax Regimes for details of taxation in the IFSC and the application process for a tax certificate.