The Financial Services Industry

1
The Financial Services Industry In
Ireland Frankfurt September 7, 2007
2
Presentation Overview

• IDA Ireland
• Recent Development of the Financial Services
  Industry in Ireland
• Key Success Factors

3
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

4
IDA Offices Worldwide
France
5
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 Irelands 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

6
Ireland 1987 2007
Irelands average annual growth in GDP has been
6 p.a. from 1987 to 2006
7
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

8
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 Dublins Docklands area
• Hub for front office activities
• 400 companies
• 20,000 employees

9
Financial Services in Ireland

• Banking
• More than 50 of the worlds 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 Irelands 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)
10
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

11
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

12
Financial Services in Ireland

• Corporate Financial Services
• Substantial population of stand-alone MNCs
  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

13
Whos here?
Banking and Asset Financing
Corporate Financial Services
14
Whos here?
Funds
Insurance
15
Financial Services in Ireland
Support activities in Ireland
16
Whos here?
17
RD 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 RD advantages associated with flexibility
  and innovation from a highly educated people.
• Centre for Financial Services Building on
  Success (Governments Strategy for future
  development of FS industry)
• World class higher education and research in
  financial
• services, quantitative management and related
  fields

18
R, D I Centres

• Citigroup
• RD centre of excellence for the development of
  products and processes for Citigroups EMEA
  operations
• First dedicated RD centre established by
  Citigroup worldwide
• 10 million investment
• Merrill Lynch
• RD Centre of Innovation focusing on the
  development of technological applications to
  support MLs global business.
• Centre of Excellence for Regulatory Reporting and
  Compliance
• 30 million investment
• Fidelity
• RD Centre

19
Key Success Factors
20
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
  1970s
• Pro-business environment
• Professional Support Network
• Government Support
• European Market Access
• Quality of Life

21
Regulatory Environment

• 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

22
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

23
Demographic Structure

• Percentage of People under 25 in the Year 2010

Source Population Division of the Department of
Economic and Social Affairs of the United Nations
Secretariat, World Population Prospects The 2006
Revision.
24
Labour Force
Population Projections in Ireland and the
EU Irelands working population will continue to
grow
Source NCB Stockbrokers
25
Labour Force

• Flexibility and Adaptability of Workforce when
  faced with new challenges

Irish workers are not just good at accumulating
knowledge. They are also very good at applying
it.
Source IMD World Competitiveness Yearbook, 2007
26
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.

27
Education

• The independent IMD World Competitiveness Report
  consistently rates Irelands 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
28
Education
The Educational System meets the needs of a
Competitive Economy
Source IMD World Competitiveness Yearbook, 2007
29
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
• RD Tax Credit
• A tax credit of 20 in addition to a tax
  deduction at 12.5 for RD expenditure in Ireland
  
• No Withholding Tax on interest or dividend
  payments

30
Corporate Tax Advantages
Lowest Corporate Tax Rate in Europe
Source IMD World Competitiveness Yearbook 2005,
OECD, EIU
31
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

32
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

33
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

34
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

35
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

36
Quality of Life

• Ireland ranks 1st in 2005 Economist Worldwide
  Quality of Life Index
• Ranking

37
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

38
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)

39
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

40
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

41
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

42

• Danke !
• For more information please see
• www.idaireland.com
• Or contact
• Damien Hennelly
• Business Development Manager
• International Financial Services Division
• Telephone [phone]
• damien.hennelly_at_ida.ie