London and Dublin in talks over access to Ireland-domiciled funds

Markets regulators in Dublin and London have started discussions over an agreement to ensure British investors can access funds domiciled in the Republic after Brexit.

Just under £500 billion of assets are held in Irish products on behalf of UK investors, representing about a quarter of the Irish funds industry. The UK’s departure from the European Union threatens those cross-border arrangements.

The Central Bank of Ireland and the UK’s Financial Conduct Authority (FCA) aim to sign a memorandum of understanding, which would let UK companies continue to manage Irish-domiciled funds.

“Firms have been searching for reassurance that regulators were preparing for when the UK becomes a third country. There will be a sense of relief in the City that the FCA is having these conversations,” a senior industry person said. “It is vital that there is a framework of agreements ready by the time we leave the EU.”

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At the FCA asset management conference last month, the regulator said its aim was to have supervisory co-operation agreements in place “as soon as possible”.

There are 1,283 funds or sub-funds domiciled in the Republic that are run by 173 managers based in the UK, according to Maples and Calder, the law firm. These hold a total of £480 billion (€540 billion).

Plans are at an early stage but both regulators want to ensure that an agreement is in place by March 29th, when the UK is due to leave the EU. The FCA and the Irish regulator declined to comment.

Memorandum

In February, Andrew Bailey, chief executive of the FCA, called on UK and EU regulators to agree a memorandum of understanding to allow a “stable and orderly transition” after Brexit.

“An MoU would be a means for the regulators to be transparent in the more practical issues around implementation, and thus that we are committed to such a period of time being available,” he said at the Future of the City dinner in London.

The FCA is also understood to be talking to other national regulators - including in Luxembourg, the Netherlands and Germany - about similar arrangements.

One person with close knowledge of the discussions said, however, that such agreements were unlikely to be labelled as MoU, which would be hard to push through under EU law. “There is a huge amount of work being done to prepare for a no-deal Brexit but no one wants to talk about it,” the person said.

The Irish regulator has grown frustrated with the slow pace of Brexit planning by some UK-based fund managers.

Last month Sharon Donnery, a deputy governor at Central Bank, warned: “The risks arising from Brexit, especially a hard or disruptive Brexit, are far- reaching for Ireland. The window of opportunity for resolving a range of issues for firms is closing fast and contingency plans need to be fully prepared.”

The Luxembourg regulator, the CSSF, made a similar statement last week, following an announcement by the European Banking Authority urging financial institutions to take immediate practical steps to prepare for Brexit and to inform customers about potential risks.

The Irish regulator agreed an MoU with the Financial Services Authority, the predecessor to the FCA, in July 1998. – Copyright The Financial Times Limited 2018