Central Bank of Ireland Deputy Governor Ed Sibley outlined the Central Bank’s strategic priorities for the next three years in the context of the safety and soundness of the financial system

Resilience of the financial system will remain a key focus for the Central Bank over the next three years
A hard Brexit will be damaging for Ireland, but short-term ‘cliff-edge’ stability risks to the financial system are manageable
Legislation is being drafted to put in place a temporary run-off regime to protect consumers of insurance products in the event of a hard Brexit

(PRESS RELEASE) DUBLIN, 18-Jan-2019 — /EuropaWire/ — Deputy Governor (Prudential Regulation) Ed Sibley this morning addressed the BPFI Risk Management & Supervisory Conference. In his comments, he outlined the Central Bank’s strategic priorities for the next three years in the context of the safety and soundness of the financial system.

On Brexit, he noted the continued uncertainty and that Brexit in any form would have a negative effect on the Irish economy.

On the topic of resilience, one of the Central Bank’s five strategic priorities, he said that the Central Bank will serve the public interest by continuing to drive the building of a more resilient financial system that helps to smooth the peaks and troughs of the economy rather than accentuate them.

He also noted that the Central Bank expects regulated firms to be looking forward, anticipating future significant risks to ensure that they remain resilient over the long term. He highlighted the example of climate change, which he said needs to be higher on the agenda for most financial services firms operating in Ireland.

He said that while a huge amount has been done to mitigate Brexit risks, the Central Bank was conscious there are some remaining risks of consumer detriment.

On the financial stability impact of Brexit, Deputy Governor Sibley said

“I am satisfied that from a financial stability perspective and on the basis of the work that we and others have undertaken, these cliff-edge risks are now manageable. The Irish banking system is considerably more resilient than it was, and the most significant firms operating in Ireland across all sectors have, in line with our requirements, prepared and are executing contingency plans for a hard Brexit. This is not to say that a hard Brexit will not be bumpy for the economy, and disruptive for the financial system, but that it is resilient enough to withstand these bumps.”

The Government’s draft legislation provides for a temporary run-off regime, which will allow certain UK/ Gibraltar insurers and brokers to continue to service existing insurance contracts with Irish policyholders in the event of a “no deal’’ Brexit. This will mean that certain UK/ Gibraltar insurers and brokers that have not implemented appropriate contingency plans can continue to service existing insurance contracts with Irish customers for a period of three years after the UK’s withdrawal from the EU, subject to a number of conditions. The legislation does not allow these firms to write new business, including renewal of existing policies; it is exclusively for the servicing of contracts (policies) that were in place prior to Brexit.

He said:

“The Irish and UK financial systems are closely connected, with firms based in the UK and Gibraltar providing financial services to Irish consumers, including insurance and payment services. The Central Bank has worked with the European and UK authorities to ensure that those firms providing services to Irish consumers are able to continue to do so in the event of a hard Brexit. The vast majority of UK based firms have taken appropriate action, but not all have to date. In this context the Central Bank has worked with the Department of Finance to support the drafting of legislation to protect insurance customers in event of no deal Brexit.”

He cautioned that even with this mitigation, there will be consumer impacts. He noted that the supply of niche insurance products may reduce or end altogether, given the increased costs and frictions of serving EU customers from the UK.

Addressing the Central Bank’s other strategic priorities he highlighted the strengthening of consumer protection and the heightened risks associated with disruptive change, particularly in the area of technology.

He concluded by telling firms that while there has been considerable progress in enhancing the resilience of the financial system, and the banking system in particular, there remains much more to be done to deliver a trustworthy financial system that is sustainably serving the needs of the economy and its consumers. On trust, he said that “if the financial system is going to demonstrate its trustworthiness, it should be taking a longer-term view than is evident today in supporting the economy and its customers.”

Notes to editors

Deputy Governor Sibley has number of engagements over coming days. Later today he will participate in a panel at the Killarney Economic Conference. He will also meet with local business representatives and visit St. Brendan’s secondary school in Killarney.

SOURCE: Central Bank of Ireland

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Nicola Faulkner +353 (0)1 224 6298 or nicola.faulkner@centralbank.ie