Good morning Ladies and Gentlemen. I am delighted to be here with you today and I would like to thank Irish Funds and Pat Lardner for inviting me to speak with you this morning at the 20th Irish Funds Annual Global Conference. This is an event that has gone from strength to strength and, which mirrors the remarkable development of the Irish Funds sector. As I was traveling here this morning, I reflected on what might have been said at that first conference, back in 1998, when the net asset value of authorised collective investment schemes was just under €60 billion. While, I am sure the focus was on growing and developing the sector, it is highly unlikely that anyone present could have quite imagined the thriving picture that we now have.
Irish funds sector
Today, as you know, Ireland is the third largest fund jurisdiction in the world, and the second largest in Europe with 6,800 funds domiciled here, managing €2.39 trillion of assets domiciled in Ireland at the end of 2017. And, the funds industry has assisted in positioning Ireland as a competitive and vibrant economy, not least through the 16,000 jobs which it supports across the country. This annual event is vital in bringing together key thought-leaders in the industry to seek and discuss innovative solutions to some of the key challenges of our time. The agenda is forward looking and ranges across areas such as digitalisation and Fintech, investment trends, regulation and the risks and opportunities presented by Brexit. I am pleased that my colleague, the Tanaiste, Simon Coveney, T.D. will be joining you this afternoon, where you will have an opportunity to get his perspective on the current position of Brexit. The funds industry has, indeed, been a successful and significant element of the Irish financial services landscape for many years. This success has been underpinned by changes in the legislative landscape that have made Ireland an attractive domicile for promoters in Asia, across Europe, the U.S. and further afield. We provide a supportive environment with a robust and consistent regulatory regime that underpins confidence in Irish domiciled investment funds.
Investment Limited Partnership (ILP) Legislation & Irish Collective Asset-management Vehicle (ICAV)
Currently on the domestic front, our Investment Limited Partnership (ILP) legislation is being reviewed to make it more relevant to today. We have engaged with all stakeholders and are continuing to work on the updated legislation. In tandem with updating the ILP, a number of technical changes are being made to the Irish Collective Asset-management Vehicle (ICAV) which will help to make the ICAV framework more efficient.
Economic and Fiscal Developments
Turning to the economy, our recovery is continuing at a robust pace. GDP grew by 7.8 per cent in 2017. Recovery is perhaps most clearly evident in the labour market with employment growth of 2.9 per cent recorded in 2017 over 2016, representing the creation of over 61,300 additional jobs over the year. In terms of our fiscal outlook, public finances are continuing to move in the right direction and are being placed on a more sustainable footing, with a balanced budget in sight and a falling debt ratio. In this regard, it is important to stress that I am continuing to prioritise the reduction of our debt burden so that the economy can withstand any adverse developments in the future. One of the challenges we face is to build upon these economic and fiscal successes, and to ensure that our recovery continues to grow at a strong and sustainable pace.
Capital Markets Union
I now want to touch upon Capital Markets Union, which has been a key project for this Commission and a project that we in Ireland have been very supportive of. Capital Markets Union is important in order for Europe to establish the building blocks of an integrated capital market in the EU through supporting the development of alternative sources of finance, complementary to bank-financing – including venture capital, crowdfunding and market-based finance. Economic analysis suggests that purely bank-based financial systems are more prone to crises and might produce lower growth performance whilst cross-border capital market integration can complement fiscal risk sharing. We, in Europe, are only a small percentage of the global market. This is a point often overlooked by some. Retaining, and where possible, increasing the attractiveness of the European package to non-European investors is paramount and something we will continue to press for in discussions at the European level. For EU capital markets to prosper, they must be open and globally competitive, and able to attract additional investment and expertise internationally. In terms of achieving progress on this important project, we must focus on those aspects of the Commission proposals that relate to CMU and can be realistically completed before the European Parliament elections and the end of the existing Commission’s term. With that in mind I want to highlight some of the recent Commission proposals that can be progressed in the coming months within Council and Parliament.
Cross Border Distribution of Funds
One of the best ways to develop our capital markets is to eliminate as many barriers within Europe for the transfer of capital between Member States. The Commission’s proposals to reduce barriers for the cross-border distribution of investment funds is a positive step in this direction. We believe the proposals will go some way towards simplifying requirements for the distribution of funds cross border and make improve transparency for investors.
Building upon innovative solutions for the industry, Ireland is supportive of the Commission’s recently published Fintech Action Plan as this area is a key strategic objective of our strategy for Ireland’s international financial services sector. We believe that fragmentation of Fintech along national lines should be kept to a minimum and we support the development of a European framework to help prevent such an outcome.
One good example is the proposed European regulation of crowdfunding service providers. Crowdfunding is an emerging and innovative industry and my Department carried out a public consultation on the potential regulation of crowdfunding where there was general support for regulation from industry and stakeholders. It is anticipated that the regulation of crowdfunding service providers on a harmonised European level will allow for the possibility of Irish crowdfunding platforms to passport their services to other European Member States, thereby widening their prospective market and making the European crowdfunding market more competitive. This is welcome from an Irish perspective. Focusing our efforts on these important files, should ensure that we have gone a good way towards enhancing European capital markets and thus further the very important goals of developing our Capital Markets Union.
IFS2020 (and new IAC international member position)
As many in this room will be no doubt be aware, we are now in the fourth year of our International Financial Services 2020 Strategy (IFS2020). Against the backdrop of the increasingly competitive and dynamic international environment for financial services our aim was to increase the numbers employed in the sector by 30% or 10,000 net new jobs by 2020. We are on track to achieve this target with almost 7,000 net new jobs created in the first three years of the strategy. Irish Funds played a vital role in IFS2020 during which they acted as Secretariat and in this regard I would like to say a particular word of thanks to Pat Lardner and his team. The IFS2020 Action Plan 2018 contains a suite of measures to be implemented by private and public sector stakeholders throughout this year. As part of the development of the Action Plan my colleague Minister of State Michael D’Arcy TD identified six key priority areas for 2018. The strength of IFS2020 lies in combining the talents, and experience of both our public and private sector stakeholders to ensure we have a consistent and focused approach to development. It is also key that the strategy benefits from a global perspective, and thus there is an international member on the Industry Advisory Committee. I wish to take this opportunity to thank the outgoing international member Professor Michael Mainelli for his contribution to the IFS2020 strategy. And also, to highlight that a selection process was started last week by Minister of State, Michael D’Arcy T.D., to identify a new international member for the committee. We look forward to receiving expressions of interest in the position.
Before I conclude I wish to highlight that Brexit is clearly one of the key issues for us, and as I stated earlier, the Tanaiste, Simon Coveney T.D., will address you on this topic later in the day. In that context, let me just refer to it briefly to outline our current position as we are in another crucial stage of negotiations. Following on from the adoption by the European Council in March of additional guidelines, a schedule of negotiations is underway between the EU and the UK leading up to the European Council next month. These negotiations are focused on all outstanding issues in the draft Withdrawal Agreement, including the Protocol on Ireland and Northern Ireland, as well as the future relationship. We are putting important plans and strategies in place at national and sectoral level, including the Action Plan for Jobs, the Trade and Investment Strategy and with the 10 year National Development Plan launched last February. The Government is well prepared for the Brexit process and will continue to work to protect and promote Ireland’s interests. While Brexit will pose challenges to the Irish economy, there will also be opportunities and the Government will work to maximise those where possible. Following Brexit, we will be the only country in the EU that is an English speaking common law jurisdiction. We have ensured additional resourcing of Enterprise Ireland and the IDA to help retain, attract and develop businesses within Ireland and to help Irish businesses export to new markets.
To conclude, the Irish funds industry has come a long way since the establishment of the IFSC in 1987. In the intervening years the sector has grown dramatically to become a global leader and major contributor to the Irish economy. While there are clearly challenges ahead, the industry appears to be well placed to face these. We share the goals of growth and development for the industry and look forward to continuing our collective efforts to develop Ireland as a hub for investment funds. I wish you all the best with your programme today and look forward to seeing the outcome of your discussions. Thank you again for the opportunity to speak with you this morning.