By Huw Jones
LONDON (Reuters) – Hubs in Ireland set up by asset management firms in Britain wanting to avoid any business disruption from Brexit could become employment magnets due to regulations saying they must be substantially staffed, an industry body said.
The Central Bank of Ireland (CBI) has received 100 licence applications from firms in Britain wanting to set up management companies or Mancos in Dublin to avoid the UK’s departure from the European Union affecting cross-border business.
The applications are also being scrutinised by the European Securities and Markets Authority or ESMA, an EU regulator, to check they have sufficient “substance” or number and seniority of staff to avoid them becoming a “letter box” or empty shell.
Irish hubs are authorised by the Central Bank of Ireland.
“The number of people mandated by the regulator for Brexit related authorisations was a fairly significant increase on previously authorised entities,” said Kieran Fox, director of business development at Irish Funds, which represents the 2.9 trillion euro funds sector in Ireland.
Mancos authorised before ESMA’s Brexit guidance did not need full time employees. Hubs being set up due to Brexit, however, need the equivalent of two or three full time staff, rising to 7-15 staff for a mid-sized Manco, Irish Funds told Reuters during a recent visit to London.
“Anecdotally, we have seen a few of the new entities filling some positions with Irish expats moving back to Ireland,” Fox said.
The Central Bank of Ireland makes a determination on a case-by-case basis and said it is reviewing rules it introduced in 2018 for ensuring that fund management companies have sufficient resources to meet their obligations. It is expected to conclude sometime in the second half of 2020.
“Our understanding is that the Central Bank of Ireland will want to see pre-existing structures come up to similar levels as the Brexit-related structures,” Fox said.
UK-based asset managers already accounted for about 36% of the total number of managers of Irish domiciled funds, an indication of the number of UK firms that could face having to bulk up on staff in Ireland.
(Additional reporting by Padraic Halpin in Dublin, editing by Alexandra Hudson)