FIBI survey: 35% say regulatory burden is biggest challenge over the next five years
In a survey of FIBI members in January 2023, 35% of respondents noted that the regulatory burden was the biggest challenge facing international finance in Ireland over the next five years, writes FIBI chair FERNANDO VICARIO. He adds that the continuing pipeline of regulations will keep compliance at the top of the agenda for the foreseeable future and given the complex, multi jurisdictional nature of the sector, industry would benefit greatly from the application of proportionality principles to requirements and the maintenance of a level playing field for all market participants. He provides an update on Ireland’s international banking sector, its role in Ireland’s economy and FIBI’s latest activities.
During a survey of members in January 2023, 35% of respondents noted that the regulatory burden was the biggest challenge facing international finance in Ireland over the next five years. The next two challenges were business costs and geopolitical uncertainties. The international banking community’s clear focus on regulation can be partially explained by the complex business models spanning multiple jurisdictions and regulatory bodies in member organisations. In a globally dispersed organisation, it is very unlikely all front line, operational and risk functions will be in the same jurisdiction. The threat of a widening regulatory divergence exacerbates this challenge.
Fernando Vicario:
Fernando Vicario: "the international banking community's clear focus on regulation can be partially explained by the complex business models spanning multiple jurisdictions and regulatory bodies in member organisations".

The capacity for National Competent Authorities to apply proportionality principles to requirements and the necessity for a level playing field are recurring themes at many FIBI forums. The continuing pipeline of regulations will ensure regulatory compliance will stay top of the agenda for all international finance management in Ireland.

The technology job redundancies resulting from the contraction of the technology sector post COVID have not filtered into the international finance sector in Dublin. There were some initial concerns about contagion but the sector has proven to be resilient, which provides some relief to FIBI members. In fact, as noted, the Federation members have provided welcome job opportunities for the expanding pool of technology talent in Ireland and consistent mid-career talent development programs.

Engagement in the domestic financial agenda
FIBI members and management are very cognisant of domestic priorities and actively support open and transparent engagement with regulatory bodies and government departments. This can be demonstrated by the support FIBI is providing to the International Subgroup of the Central Bank of Ireland (CBI) Financial Industry Forum. The purpose of this forum is to promote an open and engaged dialogue between the CBI and industry to better understand strategic priorities and mutual threats. In addition, the Federation supports the Department of Finance’s 2023 Action Plan “The strategy for the development of Ireland’s international financial services sector, extended to 2026”. Such areas where FIBI members are contributing include the prioritisation of sustainable finance, diversity and regionalisation. The FIBI Council is made up of a 50/50 gender split and is a committed supporter of Ireland’s Women in Finance Charter, representing the quality, seniority and leadership of women within the international banking and investment firm network. Some members have significant operations outside of Dublin, supporting the regionalisation agenda.

Fuelling economic and employment growth
The recent report “Fuelling Economic and Employment growth – Ireland International Banking and Investment Sector” published by FIBI showcased the thriving international banking sector’s significance. FIBI’s annual report revealed that 65% of their international banking members plan to increase employment this year, with 80% expecting growth in their Irish operations.

FIBI members are an important cog in the domestic and international financial wheel. They are a significant direct employer and support many high value local jobs in consultancy, technology and the legal profession. In addition, FIBI members make a number of important philanthropic contributions, investing both pro bono expertise and financial resources to support local communities, charities and academia. It is imperative Ireland remains firm but competitive from a regulatory perspective and retains political stability to continue attracting the largest financial providers in the world. FIBI are confident the international banks and investment firms will continue to fuel economic and employment growth in Ireland.

International banking’s significant presence in Ireland
The role of banks in Ireland expands far beyond our domestic banks but understandably there is a huge focus on our retail banking sector given its importance to the functioning of the economy. However, there is lesser profile for the international banks operating here. These banks now collectively employ more than 14,200 people working in a range of activities within the sector and this growth is set to continue. Despite ongoing geopolitical tensions and the macroeconomic uncertainty, FIBI’s international banking and investment firm sector reported growth in employment of 16% between 2019 and 2022 and the majority of the firms expect to grow their employment in Ireland this year.

Ireland's attractiveness for International Banking Operations
Ireland has many advantages to offer international banks and investment firms, including its status as the only English-speaking country with a common law tradition in the Eurozone, its firmly pro-business culture and internationally recognised regulatory standards. Ireland’s economic and political stability, and in particular, its response to the global financial crisis, continue to be key components of its compelling proposition to the sector.
At present, 17 of the world’s top 20 global banks have a presence in Ireland. Delivering innovative solutions for clients has been at the heart of international banks’ long and proud history in Ireland. This history is substantial, with BNY Mellon now here almost three decades, BNP Paribas celebrating fifty years in Ireland this year and Citi Bank opening its doors in 1965. Bank of America has had a presence in Ireland since 1968 and we are proud that Ireland serves as our European Union (EU) banking entity as well as our technology hub. The continued investment of international banks in Ireland reinforces their position at the leading-edge of financial services and helps position themselves at the forefront in driving innovation in the financial services sector globally.

Access to talent
The quality of talent available to date has resulted in the growth in the sector and additional investment for Irish operations. Across Europe there are skill shortages for many roles in financial services, particularly in the areas of regulatory compliance, digital, risk management and Environmental Social Governance (ESG). Ireland has been successful, however, in winning new business from other locations within international banking groups as a result of this competitive access to skilled talent. One of the main areas of headcount growth has been in technology. JP Morgan Dublin, for example, has over 250 colleagues supporting their global technology infrastructure and new product development. Their technology headcount has more than tripled since 2018 in Ireland and Dublin is now their largest technology centre by headcount and biggest EMEA location outside of the UK, with around 1,400 employees based in Dublin and Cork. Citi and Bank of America also have substantial headcount presence on the ground, which in the case of Bank of America totals over 1,300 colleagues.

In June, BNY Mellon announced the opening of their global digital R&D hub in Dublin. A variety of Artificial Intelligence (AI) and technology specialists, including experienced data scientists, and product and design thinking experts are in demand. The team will assist the bank in achieving its European and international research and development goals and will also work with educational institutions to sponsor and support advanced AI research, giving graduate students career and mentoring opportunities.

Many international banks in Ireland are global leaders in sustainable finance, providing innovative financial options to support the transition of their clients to more sustainable activities. This is a key objective of the Paris Climate Agreement and the impetus behind the EU’s Green New Deal and its Sustainable Finance Action Plan. In Ireland, we benefit from the expertise gained by these global banks as they implement evolving and complex sustainability requirements in multiple jurisdictions, including those of the USA, the UK, for example, as well as the EU.

Transparent disclosure of sustainability-related risks, impacts and transition plans is a critical component of ESG integration as it measures banks’ climate-related exposures and provides certainty for investors and supervisors of the sustainability of banks’ portfolios. For FIBI members with operations in multiple jurisdictions, the interoperability of new sustainability reporting requirements is a key challenge. Banks and companies with multiple listings would find it burdensome and complex to comply with differing sustainability reporting standards in each jurisdiction. Therefore, to be effective, supervisors requiring entities to measure and manage sustainability risks and opportunities must provide a global standard for climate-related disclosures.

The international banking sector requires the European Commission to ensure that its sustainability reporting regime facilitates the recognition of requirements such as those of the International Sustainability Standards Board (ISSB), responsible for Sustainability Accounting Standards Board (SSAB) standards since 2022.

FIBI welcomes the recent confirmation by the ISSB?that it is cooperating with jurisdictional standard setters to maximise interoperability between its standards and incoming mandatory reporting frameworks, including the European Commission’s European Sustainability Reporting Standards (ESRS) under the new Corporate Sustainability Reporting Directive, the USA’s Securities and Exchange Commission’s new sustainability rules and the UK’s Financial Conduct Authority which is making mandatory the implementation of the Task Force on Climate-related Financial Disclosures (TCFD).?These rules differ in scope, treatment of materiality and timelines, making it difficult for banks operating across different jurisdictions to comply in the transparent manner required.

Outlook remains positive but challenges exist
A lot of the expansion we are witnessing across international banks operating in Ireland is around building and harnessing technology solutions for their groups out of Ireland given the availability of technology talent here and an ecosystem to develop these solutions. An area where Ireland can be a global leader is around the use of technology and AI. Ireland as a prominent global financial and technological hub, has embraced AI to bolster operational efficiency, customer interactions, risk assessment, and regulatory adherence. The integration of AI technologies in banks has fostered efficiency, enriched customer experiences, refined risk management, and optimised regulatory compliance. FIBI members are optimistic about the potential future growth in this sector.

While these advancements propel the industry, mindful attention to ethical and regulatory dimensions is vital for sustainable progress. As technology continues to evolve it is paramount to ensure that the regulatory environment is fit for the use of AI, for example, by promoting innovation and legal certainty. A future-proof regulatory environment must foster innovation while maintaining a level playing field. As technology advances, striking a balance between innovation and responsible regulation is paramount for the industry’s sustainable growth.
The growth trajectory can also be attributed to the successful expansion of the individual members as their business models evolve and mature. The initial establishment of an international branch or subsidiary can be an expensive and prolonged process. However, once established it often leads to further opportunities as the parent group gains confidence and looks to bring in more business lines and expand product offerings. It is imperative that the pipeline of new entrants is encouraged and licencing arrangements can be expedited to perpetuate this growth, including for existing international firms.
Fernando Vicario, CEO of Bank of America Europe DAC and Country Executive for Ireland is Chair of the Federation of International Banks in Ireland (FIBI). FIBI is the international banking division of Banking & Payments Federation Ireland (BPFI) and is the representative body for international banking and investment firms in Ireland, representing over 30 members.
This article appeared in the September 2023 edition.