Banking

The Central Bank of Ireland regulates the banking industry under the Central Bank Acts 1942 to 1997, although as from 2003, the Irish Financial Services Regulatory Authority took over bank regulation from the Central Bank. The change was more apparent than real, since the new Regulator brings together many of the responsibilities previously held by the Central Bank (which continues to form a part of the Authority), the Department of Enterprise, Trade and Employment, the Office of the Director of Consumer Affairs and the Registrar of Friendly Societies.

Banks need licences from the Central Bank, unless they are already authorised in an EU member state under the Second Banking Directive 89/646/EEC, in which case they have to comply with certain administrative and information requirements. A non-EU bank will need to have an Irish subsidiary in order to apply for a license.

Banks qualify under the legislation setting up the International Financial Services Centre (IFSC) in Dublin, and many have taken advantage of the low tax rate (10%) offered by the IFSC. Certificates giving entitlement to the low tax rate are issued by the Ministry for Finance, and initial application is made to the Industrial Development Authority. New applications in 1999 (the last year for them) were limited under the Irish Government's agreement with the EU and the 10% tax rate applied only until the end of 2002. From the beginning of 2003 the EU-agreed rate of 12.5% applied generally to Irish companies.

The IFSC banking sector has grown extremely rapidly in the last few years; at the end of 2000 there were some hundreds of banks or bank-like organisations operating in the IFSC, with total non-resident assets over IEP£100bn, and total resident assets only slightly lower. By the end of 2003 IFSC banking assets had reached a total of 280 bn euros. This is not surprising, given that a licensed Irish bank automatically gains access to other EU countries through subsidiaries, and that the Irish IFSC tax regime is probably the best in Europe; the new 12.5% tax rate may not dent this business all that much, given the other advantages of Irish establishment, and the much-improved position under double tax treaties now that 12.5% is the 'normal' Irish rate.

In the last two years, the IFSC and the Irish Central Bank have begun to admit a number of blue-chip corporate (in-house) banks, reversing a previously stance against 'non-bank' banks, although there is still a preference away from them.