Speech by the Taoiseach, Mr. Bertie Ahern, T.D. at the Annual Lunch for the International Financial Services Industry in Dublin Castle on Monday 11th December, 2006 at 1.30pm

It gives me great pleasure to be here today. I look forward to this event every year and was sorry to miss meeting with you last year. I was unfortunately unavailable due to travel commitments but I know that my colleague Minister Micheál Martin did an excellent job in addressing you. This year, normal service has been resumed!

The international financial services industry continues to make a major contribution to the Irish economy in terms of employment and corporation tax yield. Each year that I address this audience the figures become even more impressive. This is without doubt an industry on the move, identifying new products and new markets, as it moves up the value chain, establishing itself as a serious player in the world of financial services.

Building on Success

The development of international financial services has a vital role to play in underpinning the continued growth and success of the Irish economy. Our priority is to ensure that Ireland can share in the growth of that sector and build expertise and capacity in key niche activities with high growth potential. The last time that I met you was in September when I had the pleasure of launching ‘Building on Success’, a strategy document that plots the future direction for the international financial services industry in Ireland. The key priorities identified in ‘Building on Success’ are focused on building and embedding competitive advantage for Ireland for the future.

Since the launch of this strategy, a lot has been happening and work has begun on the implementation of a number of the initiatives contained in the report. I will touch on some of these areas - education and employment, regulation and marketing.

Education and Skill needs

It is becoming increasingly clear that the education and skills gap issue is centrally important to the development of the international financial services industry. As you know this was a key theme in "Building on Success" and I am delighted that the importance of this issue has been recognised by the fact that the work of the Financial Services Skills Group is already underway. This Group will provide an important opportunity for the industry to scope out what their existing and future skills requirements will be and I understand that the Group will shortly be issuing a public call for submissions in this regard.

I would strongly encourage you to make your input to this process so that we can ensure that the study is as comprehensive and relevant as possible.

The Clearing House Group itself will be considering the proposal for the Centre for Financial Services Skills which is currently being worked on by the IDA, the HEA, FSI and the various educational institutions who have a role to play in this initiative. I look forward to proposals coming to Government in the first half of next year.

I am aware that migration policy is a matter of concern to this sector and I know that this issue has been raised by Financial Services Ireland. I am happy to say that the concerns of the financial sector are to be addressed in the context of the new migration arrangements under the Employment Permit Act 2006 which will establish a Green Card system for different occupations including some in the financial services area. These arrangements will take effect in early 2007.

Consolidation of Financial Services Legislation

Last month, the Government approved an important plank of ‘Building on Success’, when it agreed the commencement of a programme of consolidation and modernisation of the legislative framework for the regulation of financial services and the establishment of the Financial Legislation Advisory Forum. This decision demonstrates the Government's commitment to moving forward proactively on the strategic agenda for the development of financial services. The Forum will have representatives of the financial services industry and consumer interests alongside the Financial Regulator and other public service partners. It will provide an on-going mechanism for structured stakeholder engagement in the development of the legislative framework for the regulation of financial services.

This project also provides an opportunity to examine the potential for significant modernisation of Ireland's financial services legislation. It is also intended to embed Better Regulation principles and Regulatory Impact Analysis in the legislation. The legislative framework should enable regulators, in adopting a risk-based approach to regulation, to balance costs against benefits, while at all times supporting the soundness, security and reputation of our regulatory regime. In this way, responsible risk-taking and innovation by financial service providers will not be impeded.

Financial Services Strategic Plan

The Financial Regulator recently launched its Strategic Plan for the next three years, 2007-2009. The Plan highlights a number of key actions aimed at delivering the specific requirements identified in ‘Building on Success’. The Plan has also been developed in consultation with both the Industry and Consumer Consultative Panels. I understand that the dialogue with both panels has been open and constructive and this is reflected in the Plan itself.

In its Plan, the Regulator for the first time explicitly outlines the Regulatory principles it expects financial services firms to live up to. These include, among others, the need for ethical leadership, good governance, sound risk management, a willingness to engage with the Regulator and relevant public disclosure and very importantly, a commitment to protect customers. In return, the Regulator has committed to striving for proportionate regulation that is informed by Regulatory Impact Analysis.

The Plan sets out the Regulator’s risk-based approach to supervision and clarifies its approach to supervising the international wholesale sector. The primary goal of regulation in this context is to protect the integrity of the market by applying solvency requirements and corporate governance standards that meet international best practice.

The Regulator is also committed to improving the efficiency and effectiveness of the authorisation regime so that it is responsive to the commercial needs of industry. The development of the Service Protocol is well advanced. It will outline the nature and quality of service that stakeholders can expect and the co-operation needed from industry to meet these commitments – something I am sure all of you will willingly do!

Marketing

IDA Ireland will also play a significant role in pursuing the development agenda set out in ‘Building on Success’. Through its close relationships with leading global companies both at home and overseas, IDA has first hand knowledge of the changes taking place in the industry in terms of company strategy, business models, competition, product and service innovation, market trends and drivers. This allows IDA Ireland to see and respond to the needs of companies by designing new value propositions that highlight Ireland as a solution to the challenges facing the industry and its companies. This work is undertaken with the knowledge of the Government’s sustained commitment to the sector under the integrated development framework set out in the strategy document.

I would like to congratulate all the Departments, agencies and other bodies who have moved with such speed to begin to put in place the recommendations in “Building on Success”. It is a long journey but the first step has been taken.

Restructuring of the Groups

All of this work is being overseen by the Clearing House Group, chaired by Dermot McCarthy who will be reporting back to me and my Government colleagues on progress in due course. I know that work has also begun on the revamping of the membership of the Clearing House Group itself, and the IFSC Working Groups and Task Forces that operate under the aegis of my Department. The outgoing Working Groups and Tasks Forces are to be commended on the input which they made to the “ Building on Success” document.

Their excellent work now needs to be carried on by the incoming groups. I would like to thank all those who served for the past number of years on the various groups, task forces and sub-groups. I am grateful to you all and your work is much appreciated. I have no doubt that the continued success of the international financial services industry to date, is in no small part due to your dedication and commitment to the respective sectors of the industry.

The new structures that will be in place early in the New-Year will give a renewed focus and energy to their task of ensuring that the commitments and initiatives contained in the strategy document are delivered upon.

I wish you well and every success in your work – but you are allowed to enjoy your Christmas first!

Thank you.

ENDs