THE MAJORITY of IFSC-based wholesale banks will reconsider their investment in Ireland if proposed corporate governance rules are enforced, a group of German financial institutions has warned.
Six subsidiaries of German banks, including heavyweight Commerzbank, have criticised new corporate governance proposals made by the Financial Regulator for failing to distinguish between IFSC wholesale banks, and major, systemically important retail banks.
In a submission to the regulator, the group of banks made the case for alternative, proportional, governance rules for wholesale banks.
It questioned whether it is “warranted and wise to tar all institutions with the same brush”, and suggested that the potential impact on international banks be considered in greater detail.
“Perceived overregulation would make the marketing of the IFSC impossible,” the group warned.
“In the interest of the Irish economy, it is essential to strike the right balance between attracting investment and having a robust but reasonable supervisory regime.”
Under the proposed corporate governance regime outlined by the regulator in a consultation paper, banks and insurance companies would be required to have a minimum of five directors on their board. The number of directorships any one individual could hold would also be capped.
Proposals relating to the independence of the chairmen of financial institutions were described as “impractical” for IFSC banks.
In the case of the German banks, the chairman of a subsidiary is proposed by the shareholder for the approval of the board of directors and is, in most cases, a member of the parent company’s board or senior management. As such, they would not meet the independence requirements of the proposals.
“Enforcement of this rule will be a major stumbling block for Ireland when strategic decisions in respect of locations are made at group level.”
Proposals relating to non-executive directors would also necessitate major board reshuffles, it said. The group argued none of the German-owned IFSC banks required State aid or cost the Irish taxpayer any money. Neither did they suffer from “home-grown” problems, and they were all protected by their parent companies if additional capital was needed.
