Head over to our T
Ireland: 3% less dodgy than the Cayman Islands
Read more about: Cork North Central, Economy, Enterprise 
Did you know that when it comes to the financial sector, Ireland has “stronger oversight and better regulation”? That’s the sales pitch from Billy Kelleher TD who has the Trade and Commerce portfolio within the department of enterprise and employment. It’s a quote from a Financial Times story which says that Ireland is marketing itself as a location for hedge funds looking to move from from non-EU jurisdictions to the EU as a requirement to be able to market themselves in the EU.
There are several strange things about this.
First, Ireland already has a presence in the legal archipelago which the financial sector uses to spread its activities to the most favourable location, and this had brought unwanted attention long before our domestic banking sector implosion. Look at cases like the John Houldsworth, or the fact that one of Germany’s biggest bailouts came courtesy of Dublin based Depfa Bank (edit: Gavin has a comprehensive roundup). Yet now we’re out telling firms that chose to locate in Bermuda or the Caymans and that they can come here and it’s all business as usual.
Second, it’s not clear what the benefits to Ireland from picking up this business are. Of course, the same people who used to write press releases about tax revenues being ahead of forecasts can now write them about the billions of dollars in hedge funds now being administered from Ireland. Except that none of this money actually comes to Ireland. It’s a paperwork move as the assets are managed in other countries and invested in other places. It’s a nice little earner for the law firms and back office operations that pick up some extra business, but on its own, it’s a tiny contributor to growth. And other countries have the same idea, such as Luxembourg, small enough that the little extra business matters a bit more.
But worst of all is the delusion. Does Billy Kelleher think that hedge fund operators won’t do a little background research and find out what Ireland’s financial sector reputatation actually is? That the bad image can get dumped into a reputation NAMA and we all just start again as the cloudy place for shady people? It’s a bit unfortunate that the usually sharp FT allowed itself to become part of the spin.
UPDATE: More from Ciarán at Draw Breath (flagged in comments) on the delicate dance this strategy requires with our EU partners.
I wrote along broadly similar lines last night, though I didn’t pick up on the Kelleher quote. Two things though. First, I’d say that saying that hedge funds contribute a tiny amount to growth probably exaggerates their contribution to growth. Second, Ireland can still trade on being in the EU. It’s probably both not true to say it has that terrible a reputation and it’s not true that hedge funds would care so long as things don’t get too bad.
It enjoys a nice situation as an offshore haven. Its EU membership means that it will avoid anti-offshore regulations so it can behave like the Caymen islands so long as the Germans and French don’t object. What Lenihan et al don’t realise is that the protest-your-virtues-but-show-a-bit-of-leg game wears thin after a while. The EU is moving on single market regulation of systematic risks and woe betide the IFSC if its identified as the dodgy source of lots of that risk.
Kelleher and his party would open a country wide chain of brothels, if they brought in any extra taxes, and they considered them neutral, in terms of voter loss.