The international financial services sector in Ireland has grown to become a significant contributor to the Irish economy as well as establishing itself as a major European and global hub for international banking and investment firms. Ireland now hosts operations for more than 30 international banks and was the eighth largest exporter of financial services in the world in 2022. While we face ongoing global unrest, a year of elections, as well as economic challenges brought about by the cost-of-living challenges and increased interest rates, the Irish economy has remained robust and the international banking sector in Ireland continues to thrive.

A significant contributor to the Irish economy and employment
International banks and investment firms in Ireland provide a broad range of services to clients globally including markets and securities services, corporate and investment banking, private banking and payment solutions. According to the latest figures from the Department of Enterprise, Trade and Employment (DETE) foreign-owned, agency-supported companies in the wider business, financial and other services sectors spent almost €5.3 billion in the Irish economy in 2022, 19.9% more than in 2020. That included over €3.6 billion in payroll costs alone, as well as spend on Irish materials and services.

In addition, net tax receipts from financial and insurance activities increased by 12.9% in 2022 to more than €6.4 billion, according to data from the Revenue Commissioners. Both higher corporation tax revenues on profits and payroll taxes on employees contributed to the increase.

International banks also provide significant funding to the Irish economy, with total outstanding private-sector loans reaching around €15 billion at the end of 2023. This lending supports Irish corporates in running their day-to-day businesses and in capital projects to develop their operations both in Ireland and abroad, supporting firms in a wide range of sectors including agribusiness, manufacturing, power generation and transmission, packaging and forestry.

In a continuation of the upward trend seen over the past number of years, employment in the sector continues to grow. At the start of 2024, FIBI member banks and investment firms employed over 14,400 people, up almost 18% on pre-pandemic employment levels (2019) and according to a recent FIBI Members Sentiment Survey, more than 40% of FIBI firms expect to increase the number of people employed in 2024. Foreign-owned financial services companies supported by enterprise development agencies employed 31,912 people on a permanent, full-time basis by the end of 2023, 1.7% more than in 2022, according to DETE.

Furthermore, Ireland has become an important centre for technology and innovation in banking with a number of international banks setting up innovation hubs or labs here. FIBI Members have increased their investment in technology and innovation, harnessing the evolving blockchain and AI technologies and attracting significant numbers of highly trained staff. In fact, nine out of ten (91%) FIBI members expect to increase their spend on technology and innovation over the next two years (FIBI Sentiment Survey 2024). Many members have substantial development teams based in Ireland and the output from this activity is often deployed across the global network of the firms.

The increasing regulatory burden and other challenges
While the overall outlook remains positive, the industry also faces challenges on a number of fronts. According to a recent FIBI Members Sentiment Survey, the biggest single challenge that international banks and investment firms have identified for the next five years is the increasing regulatory burden. This is not surprising given the number and complexity of regulations coming down the tracks both domestically and at EU level. Domestically, the Individual Accountability Framework/Senior Executive Accountability Regime (IAF/SEAR) was singled out as a significant area of focus, while on the European front, firms must deal with the finalisation of Basel III, changes to derivatives clearing, and an overhaul of securities rules.

The buoyant economy in Ireland has proved to be a double-edged sword when it comes to talent availability. Ireland may well have one of the most highly skilled and best educated workforces in the world, but the tight labour market has led to talent shortages in the most in demand skillsets such as regulatory and compliance, digital skills, risk management and ESG/sustainable finance. FIBI members have identified that sourcing staff and staff retention is a key challenge, with personal tax levels and housing shortages likely being contributory factors.

Cyber security and cyber risk have also emerged as a challenge at a time when technical standards are being finalised for the Digital Operational Resilience Act (DORA), which focusses on digital operational risks in financial services and will have significant implications for the outsourcing of IT activities as well IT and cybersecurity risk management.

In addition, FIBI members must continue to integrate ESG factors into their business models and comply with associated reporting requirements.

Sustaining success into the future
While the ongoing success of the international banking and investment industry here in Ireland give cause for confidence that the sector will continue to make a significant contribution to economic and employment growth in Ireland, we cannot afford to take anything for granted. International financial services investment is mobile by its very nature. Against that backdrop, the Government and the regulators must continue to collaborate with the industry to ensure the operating environment remains as positive as possible and that Ireland remains a key European and global financial hub for banking and investment firms into the future.