“@ Greg - “Still, you are “Compliance Ireland”. You know what you’re talking about”. You might want to see my background on my website re your pearl of wisdom.”

No offence old boy but I did check your “background” on “your” “website”.

I wouldn’t have asked the question otherwise.

I’ll make it really simple for you.

“If a “hedge fund” is domiciled in Ireland and selling (some convoluted retail) product to 300 million people throughout Europe is the Irish regulator responsible to the consumer for the veracity of claims made by the salesmen/women of that product.”

That’s about as simple as I can put it.

But then I don’t have a “website”.

Oh, and I don’t have any legal qualifications at all.

You do. That’s why I asked.

@All - one of my points is that we continue to talk down Ireland - and this might be right when examining the issue of banks historically and indeed whatever your views are on NAMA. But this thread was supposed to be about what the new regulator said and what it means from Ireland. I was simply expressing a view that Ireland has more to offer in terms of financial services than simply main street banking.

@ Paul Quigley “The future of Main St Ireland, and of its crippled banks, is pretty bleak in your scenario.” In fact my view is not bleak, rather my view is that Irish banks stepped aside their remit - they thought they were part of the big game and got taught a very tough lesson (which is affecting everyone). Therefore we need to ensure it does not happen again. High Street banking is not dead - did you see the results for credit unions in 2009 (and not individual cases)? They provide an alternative in terms of high street banking. There is a great opportunity to re-build the banking model in Ireland. The unfortunate thing is that lots of innocent people have been hurt and they need redress either directly (in the form compensation) or indirectly (in the form of collective redress).

“Notwithstanding the multiplier effect of a few thousand new IFSC jobs, a question surely arises as to whether such a development is genuinely in the national, or even European interest.” I appreciate your point. However I am yet to see any examples where a member state did anything benevolent for the EU - we seem to forget the word ‘union’ in EU.

“It is certainly difficult to admire the ongoing shenanigans in the US financial service sector.” - You are absolutely right, so we need to fix it. The story about Lehman brothers and how the UK banks may have been involved in cherry picking is outrageous. So too are stories circulating that Wall Street banks helped hide Greece’s problems by the use of CDSs.

“Given that there are potentially 300 million investors in Europe, surely this is to Ireland’s benefit and unfortunately a loss to the Cayman Island, BVI and Bermuda”

Indeed Peter.

You’re the man to tell me this.

If a “hedge fund” is domiciled in Ireland and selling (some convoluted retail) product to 300 million people throughout Europe is the Irish regulator responsible to the consumer for the veracity of claims made by the salesmen/women of that product.

Can the Irish State just sit back and say “Ah sure it doesn’t matter. That product was sold to Klaus in Berlin. Not our problem.”?

If that’s the case Peter then let’s all ride into Europe and sell product with no back-up. Let’s “create” 10,000 jobs out of monetising hope. Let’s make money.

Between windmills and selling hedge funds to Bosnian widows Ireland should be out of this recession by next weekend.

Tally ho.

But if it’s not the case then who pays the Piper Peter?

“But Elderfield’s predecessors were obviously incapable of stating the obvious and so to us the speech seems ground-breaking.”

Feel free to speak for yourself.

“An objective view is that every other intelligent country announced the same years ago.”

Hate to be a pedant Peter, but countries cannot be “intelligent”. Monkeys can, but not countries.

Would you care to list “every other intelligent country”?

Tajikistan? Iraq? Saudi Arabia? The UAE? Iran? Tibet?

No. You don’t mean any of those countries Peter. You mean the USA, (any) European country (other than Ireland obviously), and what, Japan. China maybe.

I hear they have the best of financial regulation in China.

Still, you are “Compliance Ireland”. You know what you’re talking about.

So can you name the “other intelligent countries”?

What this speech tells us, thankfully, is that Elderfield has a vision, purpose of mission and a strategy.

The Irish financial regulator is a major contributor to policy in terms of recapitialisation and credit both received from the wholesale markets and that delivered to the end user.

Elderfield…….clearly identifies Ireland’s unique opportunity to become a central hub in financial services not just for Europe but also globally.
….once AIMFD is passed, US investment managers may not market and sell in Europe a fund that is domiciled outside of the EU.

Effectively you could double (or triple) the number of 3,300 people being employed in Ireland in hedge funds. You could double the number of existing service providers to these funds too. The economists in this group can explain the benefit the Irish economy shall derive from the multiplier effect as the employees spend their salaries in a small economy like Ireland.

We have already seen reinsurers and insurers change domicile to Ireland in the past 18 months. They are employing and are developing a significant presence in Ireland.

The above are areas for competent regulators to ……..take a leading stance to ensure Ireland creates a forward looking regulatory environment to capture this new business as well as fostering (hopefully) well regulated activity.

In a small economy like Ireland, it is completely feasible to see a time when our domestic banks play second fiddle to a larger IFSC presence.’

End quotes

I refer to my earlier contribution. It seems to me that you have confirmed the rather satirical message in the clearest possible manner. The IFSC is a bridgehead into Europe with prospects as a centre for regulatory arbitrage, provided it is clearly understood that the game is for big boys only.
The future of Main St Ireland, and of its crippled banks, is pretty bleak in your scenario. Notwithstanding the multiplier effect of a few thousand new IFSC jobs, a question surely arises as to whether such a development is genuinely in the national, or even European interest. It is certainly difficult to admire the ongoing shenanigans in the US financial service sector.

http://www.nakedcapitalism.com/2009/10/guest-post-the-empire-strikes-back.html

Well reasoned & open.

On the Hedge Funds

http://www.irishtimes.com/newspaper/finance/2010/0313/1224266197667.html

… where I think we need to support France and Germany on reform - particularly on the lunatic CDFs ………. if credibility, then yes Dublin can certainly benefit - and there are tax/revenue benefits as well, and I welcome Mr Elderfield and wish him success - The Governor is no fool.

First, Governance Reform in broad business culture a prerequisite locally and a clean out of old guard - as noted above no real change here …….. stat sig ***

But we can learn something from within the Island in today’s Irish Times

Board members sacked over tendering .. by Minister Murphy

http://www.irishtimes.com/newspaper/ireland/2010/0313/1224266197967.html

One does not need to be an expert in Shariah Law to take effective Executive Action - and to those who are - Marhaba Ahlan WaSahlin (-;

What this speech tells us, thankfully, is that Elderfield has a vision, purpose of mission and a strategy. This is something that the previous CEOs of the Financial Regulator and Governor of Central Bank could never articulate in one meaningful sentence. I cringe when I recall those moments on RTE when the previous Governor and Financial Regulator continually put their feet into their respective mouths. To think that international commentators saw these people as being the best of Irish breed is soul destroying.

In terms of comments about capitalisation, it is of course the Financial Regulator’s role to be in that space. The new structure of regulation in Ireland is a unitary central bank and regulator. Even in a country like the UK where the central bank and the financial regulator are split (at least for the time being) Hector Sants (FSA CEO) has a significant role in respect of recapitalisation (or nationalisation) of the likes Northern Rock and RBS. That is extraordinary for a country which is not part of a monetary union. No disrespect to the Central Bank of Ireland, but it cannot: (a) control money supply; (b) decide upon open market operations; and (c) set interest rates. On paper there is not a lot on its plate in terms of a job description. It just so happens that a small part of its job description, that of domestic financial stability, has exploded and kept it busy. In this melting pot the Irish financial regulator is a major contributor to policy in terms of recapitialisation and credit both received from the wholesale markets and that delivered to the end user.

On the point of securities regulation raised by Donal Byard, we have to note that Irieland does not have a primary securities market in the same manner as the US, UK, France and Germany. Securities law in Ireland is the same as that for the rest of Europe (see the EU directives in this regard -Transparency, Prospectus, Market Abuse and MiFID to name but a few), but no-one lists in Ireland to gain international traction unless they are a mutual fund which only does so to allow investment managers to comply with mandates which require investing in securities listed on OECD markets (effectively they substitute the purchase of trading listed companies for listed mutual funds, many of which are domiciled overseas). It is for that reason and not an absence of regulatory appetite that we don’t have a significant operational securities regulation. Securities regulation operates at both a macro and micro level - Ireland has the macro obligations for sure, but our markets function at the micro level.

Elderfield’s speech is more than just about enforcement, assertive risk based approach, bank restructuring and recapitalisation. He clearly identifies Ireland’s unique opportunity to become a central hub in financial services not just for Europe but also globally. If Ireland and those who only concentrate on bank regulation pull their heads out of their navels they will see that, as Elderfield raised, we have a ripe opportunity to develop (or further develop) four financial industries (i) mutual funds industry - read UCITS IV; (ii) hedge Funds - read AIMFD; (iii) reinsurance/insurance - read Solvency II and (iv) Islamic Finance - see the Finance Bill. The Irish Times today refers to the Irish Funds Industry Association as stating “3,300 people out of the total 12,500 employed in the funds industry here are in the hedge-fund sector” (http://www.irishtimes.com/newspaper/finance/2010/0313/1224266194854.html). Are we all aware that once AIMFD is passed, US investment managers may not market and sell in Europe a fund that is domiciled outside of the EU? Given that there are potentially 300 million investors in Europe, surely this is to Ireland’s benefit and unfortunately a loss to the Cayman Island, BVI and Bermuda. Two offshore law firms with funds companies have already seen the future and have entered the Irish market so that they don’t lose their share of hedge fund business. Another foreign law firm is entering Ireland too. They must think that Ireland is a good bet. Effectively you could double (or triple) the number of 3,300 people being employed in Ireland in hedge funds. You could double the number of existing service providers to these funds too. The economists in this group can explain the benefit the Irish economy shall derive from the multiplier effect as the employees spend their salaries in a small economy like Ireland. UCITS IV will provide similar benefits although perhaps not to same the magnitude – and the government has amended law to allow for ease of redomiciling of these funds. We also have Solvency II. If Ireland plays the game properly we will become a centre of insurance/reinsurance excellence (and I appreciate the GenRe / Cologne Re debacle of a few years ago). Elderfield was at the heart of this sector when he ran the Bermuda regulator. We have already seen reinsurers and insurers change domicile to Ireland in the past 18 months. They are employing and are developing a significant presence in Ireland.

Another opportunity for Ireland, arising from the Finance Bill, is the proposed new tax and regulatory regime for Islamic Finance. The assets of Islamic banks are expected to grow at a rate of 24% per annum to $ 1.85 trillion by 2013. If Ireland doesn’t want a share of this market, then Malaysia will happily clean up. We have a solid funds industry in Ireland and it can be easily adapted to support Islamic Funds and Sukuk (bonds). [A disclosure here – I am a NED of an investment company which manages an Islamic Fund].

The above are areas for competent regulators to not simply monitor once they exist, but rather take a leading stance to ensure Ireland creates a forward looking regulatory environment to capture this new business as well as fostering (hopefully) well regulated activity.

Irish banks have done tremendous damage to Ireland’s other financial industries. Not only are the banks draining other industries of vital capital in the form of government investment but we are spending so much time and intelligence fixing historic errors we are likely to miss out on new opportunities. I truly hope Elderfierld gets the resources he wants so that half of them can regulate and deliver enforcement on past despots and the other half can ensure that future regulation doesn’t hamstring new industries. In a small economy like Ireland, it is completely feasible to see a time when our domestic banks play second fiddle to a larger IFSC presence.

If we as a country, and we as a group of professionals, dedicate as much time to enhancing the architecture for the above industries as we do dissecting the bank crisis we should achieve the right mix of financial services that a country like Ireland can benefit from. I hope one day that in terms of regulation that banks, albeit remaining systemically important, no longer have the respect they currently enjoy in the minds of the public. It might sound laughable, but one day mum and dad may be prouder of young Conor or Niamh who manage pension funds, are experts in Shariah Law or cede insurance risk than they are of them working at an indigenous Irish bank.

More on Elderfield’s speech including our press release at http://www.complianceireland.com/Newsletter.html#Elderfield_First_Speech_20100312 and http://www.complianceireland.com/Press.html

Very “UNTHINKING” of you - Alan is not impressed.

With Alan Dukes, aka 2_of_7, taking over from ex-chair of Anglo who is exBig-4 who is exchair of DDDA (where’s dat report?), who sat with Shawnee the first ex-chair (friendly with Fingers & Spectacles on the three card tricks on the millions and the billions: now you see it - now you don’t), who still sits with Maurice who is exchair of BoI and on NPRF committee (and who gave Irish Supreme Court the Harvey Smith while, allegedly on DCC board in 2007) which is being raided to prop up BoI & Anglo & Fingers & AIB - and Spectacles still in her chair while the really BigChair takes a stroll in free_mawrkett_eering Chicago - it is probably a good job that the Great UnWashed UnThinking Joe and Joans of the great UnEnlightened Citizenry do not look up from reading about the grand affairs of Drop_Kick_Jonny who rents to NAMA the space to srude_ify the citizens while simultaneously popping his debts into same (win-win) as AIB rewards its lieutenants for getting billions gratis from the citizens as the word goes out that all is ‘above board’ and ‘all boards are above board’ by the scrude citizenry who should be supinely grateful for serf_dom in the New Open Innovative Republic where ‘Governance is Governance is Governance by US Upper_Echelons’ and the only moves are sideways to other boards.

Governance Reform is a precondition for Fiscal Reform. There is no evidence of the former at the moment stat sig ***

Wasn’t that behaviour at Lemhan Brothers just disgraceful.

I was shocked. Shocked I tell you.

Pity we don’t have someone like Birgitta Jonsdottir in the Dail.

http://www.youtube.com/watch?v=du8DZ2snSgs&feature=player_embedded

http://www.youtube.com/watch?v=esUPdgHbm4U&feature=player_embedded#

I see what you mean. We are not on risk for senior creditors of IFSC operators (like bondolders?)

One simple change in the law would then have avoided all this mess.

Deposits to rank above all capital (including bonds senior, junior, dated or whatever you having).

But is that not because Hypo acquired Depfa six months or so before implosion?

However, if the parent regulator is responsibile that’s all the better.

Having said that there must be “independent” operations.

I hope the regulator is up to the task.

True

On the Tobin tax. I think the EU or World Bank have first dibs.

But I am thinking of a situation analagous to Icesave.

The Icelandic people knew nothing until the SHTF.

Are we on risk for IFSC.

This article from 4 months noted that:
“We were promised five inquiries into the reasons for the Anglo collapse and the pursuit of any wrong doing internally. Those bodies were: the ODEC (Office of Director of Corporate Enforcement); the ISEQ (Irish Stock Exchange); The Garda Fraud Squad; CARB (Chartered Accountants Regulatory Board and the Financial Regulator. Their focus was to probe breaches of company law, banking regulations, fiduciary responsibilities to shareholders, the role of Ernst and Young as auditors and any infringement of statute law.

What has happened since? No findings have been made. No charges preferred. Not even a file sent to the Director of Public Prosecutions. This is intolerable. The credibility of these investigations has to be questioned. The prima facia evidence is overwhelming and straightforward.”

http://www.irishexaminer.com/opinion/columnists/ivan-yates/lack-of-accountability-is-the-real-scandal-in-anglo-irish-fiasco-104846.html#ixzz0i0718bZW

We may get a few prosecutions but the full truth in a timely manner? Never, not with our establishment. They may tell us something in 9 months, probably later. Frank Fahey will then do his best on the Dail committee and Lenihan, Cowen and Eamon Ryan in the full Dail debate to turn the whole thing into a mud wrestling match.

Our system of governance is utterly broken.

With all due respect to all I have heard PR focused stuff before and there was no follow-on. And I do not expect nay follow-on from this.

It sound great I must admit. And no doubt we shall hear more great things like thiis.

Who takes such nonsense seriously?

Giving the Irish establishment a financial services centre is like giving a chain of petrol stations to a gang of pyromaniacs.

But my question was “are we on the hook for the IFSC?”.

If not, I don’t care what they do there. They can paly blackjack and “Find the Lady” all day long if they wish.

If we are, I don’t see how the Regulator can possibly be given enough resources to to do an effective job.

@Michael Hennigan
The big 4 need to be broken up. Dramatic reform is required of accounting standards and audit practices for big institutions.

@Greg
The establishment’s new wheeze is to strictly regulate the retail banks but have a free for all in the IFSC, including I would guess after a lull, in the retail banks IFSC subsidiaries. It will all end in tears. Even letting AIB et al have ANY continued involvement in financial gambling is insane.

As noted prviously - well over 95% of upper-echelon boards of directors still in position or in positon(s) on different upper-echelon boards - from the semi-states, through Big4-reps, through many banks, through DDDA (&Anglo!), to Quangos, and so on. Minimalist and purely latently strategic [see most recent DDDA-Anglo moves e.g.] glossing over only. Corporate Governance Today = Corporate Governance Yesterday, stat sig ***.

I wish Matthew Elderfield well.

The balance sheet manipulation was intentional, for deceptive appearances, had a material impact on Lehman’s net leverage ratio” and caused financial reports to be misleading, Valukas wrote of the New York-based company. Higher leverage undermines a firm’s capacity to absorb financial shock.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aGeWL3bkusWQ&pos=3

“a key gauge of strength was “reverse-engineered””

I wonder will that expression become common jargon in media, political or legal circles in Ireland.

“McGarvey, the author of the e-mail, stated that counterparties such as Mizuho knew that Repo 105 transactions received off-balance sheet treatment and as a result might “try to squeeze Lehman.”

Here’s a thought, did ILP “try to squeeze Anglo”?

“Lehman’s Repo 105″.

Now that’s how to dress a balance sheet.

Are we really confident that “Ireland” can regulate the offshore activities of these institutions.

We would need 10,000 regulators.

http://www.zerohedge.com/article/lehmans-repo-105-counterparties-barclays-mizuho-ubs-deustche-bank-and-kbc-may-have-attempted

Then there was a third firm IL&P who helped massage the Sept 2008 year-end figures with the loan of €4.5bn, treated as a deposit.

It may not have been a once off event as even in the good times there was an incentive to maintain the image for outperformance as Europe’s best performing bank.

So we are to believe that the Big 4 auditing firms were bufoons when checking year end transactions is a bog standard routine of auditing.

As for the apparently Trappist style operation in a corner of central bank hq, the people who could have made decisions with huge implications, hadn’t heard about the discovery of the hidden loans at Anglo Irish for almost a year, by office colleagues. Well that is a story that is hard to fathom.

Post Lehman Bros. crash; post State bank guarantee, the issue becomes public knowledge when used car salesmen had a better reputation than bankers.

Maybe I’m wrong but it appears that Elderfield is concerned with the quantum of credit. Is that not the job of the Central Bank?

I would prefer it if the regulator restricted himself to ensuring that whenever credit flows it’s flow is regulated. Where the policy objective is to “get credit flowing” the must be a danger that this would conflict with prudence. Have we not been here before?

“ The recapitalisation exercise will help draw a line under the banking crisis and therefore help get credit flowing again. It is not for the benefit of the banks or their management but is an essential step for the recovery of the finances of Irish businesses and Irish households by improving confidence in the economy.

Another concern is,

“ What is needed to make this new approach work? Ireland is competing as a premier financial services centre.”

Of itself there is nothing wrong with this. But I do wonder to what extent the Irish State has liability for failure in the regulation of IFSC authorised institutions.

Will we find, at some future date, that we are being sued for failing to properly regulate a Zimbabwean hedge fund?

but does he walk the walk?