The Financial Services Industry
In Ireland
Frankfurt
September 7, 2007
Presentation Overview
• IDA Ireland
• Recent Development of the Financial Services Industry in Ireland
• Key Success Factors
Role of IDA• Investment and Development Agency
– Government agency with its own Board– Attracts FDI to Ireland– Supports existing companies to develop further activities
• Provide Information and Advice on – Location, Property Development, Skills availability/cost and the Business Environment
• Arrange introductions to – Regulatory Authorities, Existing Companies, Advisors (tax, legal, etc), Service
Providers, etc
• Facilitate and assist rapid start-up
• Tailored financial support
California
New YorkAtlanta
Chicago
UK
Germany
Japan
Korea
Taiwan
Australia
Ireland
Shanghai
IDA Offices Worldwide
France
Foreign Direct Investment in Ireland
• FDI in Ireland estimated at €50 billion
• More than 1,000 companies directly employing approximately 135,000 people
• 82% of Ireland’s exports
• Direct expenditure of €15.5 billion in the Irish economy
• Corporate Tax of €2.8 billion paid by IDA supported companies in 2006 (??)
• Clusters of world leaders:
• Financial Services
• ICT
• Pharmaceuticals and Healthcare
• Software and Services
Ireland 1987 – 2007
Ireland’s average annual growth in GDPhas been 6% p.a. from 1987 to 2006
1987 2007
Employment 1.1 million 2.1 million
Unemployment 18% 4.5%
Budget Surplus / (Deficit) as % of GNP
(9.1%) 1.2%
National debt as % of GNP 118% 28%
GDP per capita (at 2006 constant prices)
€15,339 €41,627(est.)
Personal Tax rates 35% to 58% 20% to 42%
Financial Services in Ireland
• Ireland - recognised as a Centre of Excellence for a range of internationally traded financial services
• Main areas of activity– Banking
– Funds Management/Administration
– Insurance
– Corporate Financial Services
• Total industry employment nationally: 70,000+
• Dramatic transformation of industry in last 20 years
Financial Services in Ireland
• International Financial Services Centre (IFSC), Dublin
• Established 1987 • Tap into global expansion of financial services industry• Provide quality, sustainable employment• Aid the re-development of Dublin’s Docklands area
• Hub for front office activities– 400+ companies – 20,000 employees
Financial Services in Ireland
Banking
• More than 50% of the world’s top 50 banks located in Ireland
• Ireland is the 11th largest international banking market globally*
• Total assets in excess of €822 billion**
• Assets of the Irish banking industry in excess of five times Ireland’s GDP
• Activities based in Ireland include:– International lending, fixed income portfolio management, specialist derivatives,
treasury, securitisation, short and long-term capital raising, custody/trustee and administration services for mutual funds
Source: * Bank for International Settlements (June 2006)** Central Bank of Ireland (December 2006)
Financial Services in Ireland
Fund Management, Custody and Administration
• Leading location for the domicile, management and administration of investment funds
• Rapid growth – €1.5 trillion in assets (April 2006) administered
• Approximately 4,500 funds and sub-funds, operated by the key players in the global funds industry
• Fastest growing global alternative investment funds sector – 37% of global assets (€475 billion in 2,000 funds)
• 280+ international fund promoters
• 9,500+ employees
Financial Services in Ireland
Insurance, Reinsurance, Life Assurance and Captive Assurance
• Ireland - major player in a range of insurance activities
• 126 international insurance companies – 3,000 employed
• Ireland - number one centre for cross-border life assurance business in Europe (2006 - Life Assurers wrote €15 billion of premia)
– 65 Life companies versus Luxembourg (58) and IOM (19).
• Non-life insurance - Gross premia written €18 billion (2006)
• More than 200 captive insurers are established in Ireland
• Ireland is 7th largest reinsurance market in the world
Financial Services in Ireland
Corporate Financial Services:
• Substantial population of stand-alone MNC’s including:– Lucent, Porsche, Net IQ, Microsoft, Cisco, PepsiCo, Caterpillar, Oracle, GE
Finance, Pfizer, Hewlett Packard, Bristol Myers Squibb, IBM, Wyeth, Volkswagen, Skandia, Probus, Nestle, Mitsui Sumitomo…
• Activities undertaken include:– Treasury, Cash Management, Group Funding, Payments Factory, Captive
Finance, Securitisation, Pan- European Pensions, Group Procurement, International Tax Management, IP & Brand Management and Debt Issuance & Listing
Who’s here…?
Banking and Asset Financing
Corporate Financial Services
Who’s here…?
Insurance
Funds
RBS
Prudential
Fidelity
Sun Life of Canada
Bear Stearns
AIG
Cognizant
Delta Dental
GMAC
IT & Software
AXA
Barclaycard
MBNA
Churchill (RBS)
Prudential
Europ Assistance
ICT Eurotel
GE Capital
HBOS
Customer Support /Services
Deutsche Bank
Merrill Lynch
Citigroup
Fortis
GE Capital
CIGNA
Pacificare
Aetna
GMAC
Mid/back-office Operations Centres
Financial Services in Ireland
Support activities in Ireland
Who’s here…?
R&D in Ireland
• Strong Government commitment to research and technology.
• Significant Government funding available • Industry related research and Academic/joint research programmes.• Thriving internationally-recognised research community.
• Strong links between Industry, 3rd Level Institutions, European Universities and EU Institutions
• Direct R&D advantages associated with flexibility and innovation from a highly educated people.
• Centre for Financial Services – Building on Success (Government’s Strategy for future development of FS industry)
• World class higher education and research in financial
services, quantitative management and related fields
R, D & I Centres
Citigroup• R&D centre of excellence for the development of products and processes for Citigroup’s
EMEA operations
• First dedicated R&D centre established by Citigroup worldwide
• €10 million investment
Merrill Lynch• R&D Centre of Innovation focusing on the development of technological applications to
support ML’s global business.
• Centre of Excellence for Regulatory Reporting and Compliance
• €30 million investment
Fidelity• R&D Centre
Key Success Factors
Why Ireland ?
• Regulatory and Legislative framework
• Skilled and Flexible Workforce
• One of the best education systems in the world
• Consistent approach to Taxation policy since 1970’s
• Pro-business environment
• Professional Support Network
• Government Support
• European Market Access
• Quality of Life
• Efficient and responsive pro-business regulatory environment • Prompt application of EU directives, facilitating pan-European
offering of approved products (e.g. UCITS III Directive, Reinsurance Directive, etc)
• Highly regarded and reputable Regulatory Authority (IFSRA)• Directly accessible to industry
• Principles-based approach (not hampered by legacy rules)
• Prudent but progressive • Solution oriented for new products
Regulatory Environment
Operating Environment
• Common Law framework and Anglo-Saxon business model
• Continuously amended and refined to support global institutions
• World class pool of professional expertise
• Consistency of Government inputs and public policy
• Proactive public/private industry forum
• English language and Euro-zone membership
Demographic Structure
Percentage of People under 25 in the Year 2010
23.625
.124.9
2730.4
26.1
30.4
0510152025303540
I rel
and UK
Czech
Rep
Fran
ce
Hun
gary
Germ
any
Spain
I tal
y
Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2006 Revision.
Labour Force
2000210022002300240025002600270028002900
1995 2000 2005 2010 2015 2020
225000
230000
235000
240000
245000
250000
255000
Ireland
EU
Source: NCB Stockbrokers
Population Projections in Ireland and the EU:
Ireland’s working population will continue to grow
Labour Force
Flexibility and Adaptability of Workforce when faced with new challenges
0123456789
Source: IMD World Competitiveness Yearbook, 2007
“Irish workers are not just good at accumulating knowledge. They are also very good at applying it.”
Education
• 1 million+ people in full-time education.
• 7 universities and 13 Institutes of Technology • emphasis on Business, Accounting and Finance courses.
• Private Colleges and Professional Bodies • offer courses at both undergraduate and postgraduate level.
• 50,000 graduates p.a. across all disciplines• 25% are Business, Accounting and Finance graduates.
Education
• The independent IMD World Competitiveness Report consistently rates Ireland’s education system highly
• Ireland ranks in the top six countries globally on the following criteria:• The educational system meets the needs of a competitive economy• Economic literacy is generally high among the population• University education meets the needs of a competitive economy• Education in finance meets the needs of enterprises
Source: IMD Competitiveness Yearbook 2007
Education
4.03
4.79
4.155.3
1
4.886.1
96.09
012345678
I rel
and
Net
herla
nds
Belgi
um
Fran
ceUSA UK
Germ
any
Spai
nI t
aly
Source: IMD World Competitiveness Yearbook, 2007
The Educational System meets the needs of a Competitive Economy
Corporate Tax Advantages
• 12.5% Corporation Tax
– consistent policy of low corporation tax since 1950
– fully compliant with EU rules
• Extensive Double Tax Treaty network
– 44 countries (10 more under negotiation)
• Holding Companies Incentives
– includes a capital gains tax exemption on disposal of shareholdings of companies in tax treaty countries
• R&D Tax Credit
– A tax credit of 20% in addition to a tax deduction at 12.5% for R&D expenditure in Ireland
• No Withholding Tax on interest or dividend payments
Corporate Tax Advantages
0510152025303540
Lowest Corporate Tax Rate in Europe
Source: IMD World Competitiveness Yearbook 2005, OECD, EIU
Professional Support Network
Banking and Funds sectors
• Irish Funds Industry Association• Irish Association of Investment Managers• Irish Association of Pension Funds• Irish Bankers Federation• Federation of International Bankers of Ireland• Society of Investment Analysts in Ireland – affiliated with CFA
Professional Support Network
Insurance
• Dublin International Insurance and Management Association• Financial Services Ireland• Professional Insurance Brokers Association• The Insurance Institute of Ireland• The Society of Actuaries in Ireland
Corporate Treasury
• Irish Association of Corporate Treasurers
Professional Support Network
General Financial Services and Markets
• Financial Services Ireland• Institute of Management Consultants• International Financial Services Centre Online• Online ACI – Financial Markets Association• Irish Financial Services Regulatory Authority• Department of Finance• Finance Dublin • Institute of Taxation Ireland
Government Support
• Pro-business policies from successive governments
• Business friendly legislation and regulation
• Significant and on-going investment in education and infrastructure
• Consistent commitment to low tax model
• Joint Government/Industry representative groups
• IDA Ireland – Government marketing and support agency
European Market Access
Ireland as a launch pad for Europe is a key advantage for international financial services institutions
• Immediate access to a European market of over 455 million people by locating in Ireland
• EU Passporting Rules for banking, insurance and investment products position Ireland favourably as a base for co-ordinating and launching products into other European markets
Ireland ranks 1st in 2005 Economist Worldwide Quality of Life Index
Ranking:Quality of life GDP per person
Score Rank $ (at PPP)
Ireland 8.3 1 36,790
Switzerland 8.1 2 33,580
Norway 8.1 3 39,590
Luxembourg 8.0 4 54,690
Sweden 7.9 5 30,590
Australia 7.9 6 31,010
Quality of Life
Some Lessons Learned…
• Cohesive national commitment – from Government, business and regulator – and global reach
• High quality, accessible and responsive regulation
• The European dimension
• Speedy, agile and flexible execution focussed on market opportunities
• A supportive, welcoming and evolving ecosystem:• Regulation• Legislation• Taxation• Education• Infrastructure
Continuing challenges
• Globalisation, technology changes and new competitors
• Changes in marketplace for financial services
• New business models
• Regulatory and legislative requirements internationally
• Changing Irish conditions and costs
• Tax competition
• Skills and talent development
• Research, Development and Innovation (RDI)
The Future….
Vision:
Ireland becoming a significant player in the global Financial Services
industry:
• Focussed on niche opportunities
• Recognised as a world-class centre for Innovation and
Execution
• Leveraging key competitive advantages
The Way Ahead….Being a distinctive financial services location:
• Positioning Ireland as the centre for the translation of EU legislation and regulation into operational platforms
• Identifying new market opportunities with key players
• Strengthening innovation capabilities
• Continuing to enhance the supporting ecosystem, especially in regulation, legislation, tax, education and hard and soft infrastructure
• Remaining flexible and quick to anticipate and respond to emerging opportunities
• Focus on high value knowledge-based activities
Market opportunities
• Specialist debt issuance and financing, banking products…
• Pan European insurance and pension products
• Centre of scale in asset management
• Centre of excellence in funds servicing
• Product development and innovation
• Technology and process development
• Build on existing strong base, but recognise continuing challenges
from changing market and environment
Danke !
For more information please seewww.idaireland.com
Or contact
Damien HennellyBusiness Development Manager
International Financial Services DivisionTelephone: +353-1-6034075