Wednesday, 23 December 2009

Ireland seeks Hedge Funds

Nat O'Connor: A article in the Financial Times states that the Government is seeking to attract hedge funds to Ireland.

Dublin to open door for hedge funds (19 December 2009): "The Irish government has passed legislation to make it easier for hedge funds based in the Cayman Islands and other tax havens to move to Dublin."

The new legislation reportedly "cuts red tape to a minimum" in terms of moving companies to Ireland.

The Minister for Finance is quoted as saying that the finance bill early next year to will "strengthen Ireland's competitive edge in this important sector".

Howver, the FT states that many investors are looking for hedge funds to be more tightly regulated. Billy Kelleher, Minister of State for Trade and Commerce, is quoted as saying that "Funds are looking for stronger oversight, and better regulation, and we believe Ireland has that in spades."

Patrick Honohan, Governor of the Central Bank in a speech (1 Dec 2009) has written that "I will certainly not allow Ireland to become a soft option for firms or activities that are no longer welcome elsewhere."

However, Honohan concludes "the primary onus for sound operation must fall on the directors and management of the banks themselves. They must renew and reform their business models and culture to ensure that a recurrence of such a collapse becomes unthinkable. As has been suggested by one former regulator abroad, a watchword for supervisors in the new era must be: trust less, verify more."

How is this different from what has gone before? Is Irish banking regulation really tightening up? And can it be tight enough (and expert enough) to regulate an influx of hedge funds?

1 comment:

An Saoi said...

Nat, The proposed changes are likely to be included in the Finance Bill, which is due to be published on 4th February. The changes are another move away from an economy that produces products or real services to one which is based and on international scamming. There is a clear movement of many companies from places seen as havens to so-called "on-shore" locations. Ireland has a number of key advantages over the main alternative, Switzerland. These include a common law based legal system and a good network of tax treaties. We have seen it to date with the relocation of Head office structures to Dublin and we will now probably see a tsunami of Hedge Funds and related private equity funds relocating here hit seems there was a clear logic behind recruiting the former Bermudan regulator. There is however little permanent employment involved, other than in professional firms servicing them.

There is also little or no tax yield as Hedge Funds of themselves are not taxable, rather the investors are. I cannot see too many of the fund managers moving to Ireland. I understand these staff are normally based in places like London.

The Head hunting of the former Bermudan regulator now seems to have been part of the process. The Central Bank/Financial Regulator is only one part of the regulatory process. Will the ODCE & Revenue be suitably staffed also. PWC have recently hired the former Head of the Revenue's insurance unit, without any period in purdah. An explanation from SIPO on that point would be of interest! Of course PWC would not have any advance notice of the Minister for Finance's plans would they?