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

damien.hennelly@ida.ie