The Central Bank has been working on Brexit since before the UK Referendum. While hoping for the best, we continue to prepare for plausible worst-case scenarios, including a “hard” or “no deal” Brexit. Our regulatory approach is in line with sound European practices, which we influence and help shape.

The Irish economy is particularly exposed to risks from Brexit. There is a high degree of interconnectedness between the Irish economy and the UK economy. The domestic economy and cross-border trade could face significant challenges from a disorderly Brexit.

We expect firms to be realistic and prepare for all plausible scenarios. We continue to push financial services firms to ensure that they are adequately prepared to cope with the possible effects of Brexit, with as little disruption for consumers as possible. We will continue to work with regulated firms to ensure they act in the best interests of consumers. This includes keeping customers updated on any potential disruptions so that they can make their own plans.

Risks are being mitigated by most firms, but it is likely that, even with good preparation, some residual risks will remain.

Since the UK voted to leave the EU, the Central Bank has instructed firms on the need to have appropriate contingency plans in place to ensure continuity of business and to address key risks that may arise from Brexit.  We continue to monitor progress in this area.  In cases where the potential impact could be greatest, the Central Bank has asked firms to provide details of their contingency plans for assessment.

The majority of Irish authorised banks, insurers and brokers have provided us with information on their assessment of Brexit-related risks and related contingency plans and timelines.  In the majority of cases, we consider that planning is adequate.  In some cases, progress is slower than expected.  While acknowledging the political uncertainty surrounding Brexit, we continue to challenge firms on their contingency plans and progress made to date.

We continue to engage with UK and Gibraltar regulatory authorities to ensure firms providing financial services into Ireland after Brexit are aware of their statutory obligations.  Where firms have not engaged with the Central Bank, we have written to them advising that, in the event of a “hard” or “no deal” Brexit, they must obtain the necessary authorisation to continue operating in the Ireland.  Firms without the appropriate authorisation will no longer have an option to provide services into Ireland on a Freedom of Establishment and Freedom of Services basis after Brexit. 

The decision to withdraw from the EU has resulted in a range of UK-based firms seeking authorisation from the Central Bank to relocate some of their activities, so that they can continue to provide services within the EU after Brexit. We have increased our headcount and reallocated senior and experienced staff to effectively manage the large volume of applications being processed over a relatively short period. In assessing these applications, we are focused on ensuring that any firms authorised in Ireland meet the high standards expected of any firm authorised in the EU.

A "no deal" Brexit is a scenario where the UK and the European Union have not ratified a Withdrawal Agreement by Brexit date.  This is likely to lead to a period of uncertainty, however, in this situation Contingency Action Plans will apply.   Further information is available:

Government of Ireland

Preparing for the withdrawal of the United Kingdom from the European Union on 29 March 2019: Contingency Action Plan

Getting Ireland Brexit Ready

Brexit Contingency Action Plan 

European Commission

Brexit: European Commission implements “no-deal” Contingency Action Plan in specific sectors

In the absence of any agreed specific arrangements between the UK and the EU to ensure access to each other’s markets, UK firms will lose their right to conduct business in Ireland unless they have appropriate contingency measures in place.

At present, firms can provide financial services across the European Economic Area (EEA) by way of Freedom of Establishment (setting up a branch) or Freedom of Services (via the so-called financial services “passport”) without having to seek an authorisation in each country.

If there is a Withdrawal Agreement in place, UK firms will be able to continue to conduct business in Ireland and across the EEA by way of this passport for the duration of the agreed transition period (i.e. until December 2020, with the potential for the passport to be extended).

We expect that the majority of firms will take appropriate action to continue to provide services across the EU. Where firms have not engaged with the Central Bank, we have written to them advising that, in the event of a “hard” or “no deal” Brexit, they must obtain the necessary authorisation to continue operating in the Ireland.

Financial services firms have a number of options available to them to mitigate this risk. Banks and insurance companies could set up a branch of their firm in Ireland, if appropriate.  Insurance companies can also transfer their portfolio to an insurance company based in one of the other 27 Member States of the EU.

For firms providing services to Irish customers, we continue to monitor firms’ contingency plans. Where the Central Bank directly regulates the firm, we continue to engage with firms to monitor their progress.  For firms regulated in the UK we have ongoing engagement with the Financial Conduct Authority and Prudential Regulation Authority in the UK, and the Gibraltar Financial Services Commission for firms authorised in Gibraltar.  However ultimately it is the responsibility of individual firms to ensure they have an appropriate plan in place.

The majority of insurance firms selling policies from the UK (including Gibraltar) into Ireland, are implementing plans to mitigate the risks of a “hard” or “no deal” Brexit.

Where firms do not take mitigating actions against the possibility of a “hard” or “no deal” Brexit, there is a risk to Irish consumers in relation to the continuity of service for cross border insurance contracts.  This  could affect consumers in a number of ways; for example, it may not be possible to amend policies, or pay claims associated with policies, written prior to Brexit.

Your insurance provider should be taking steps to prepare for the possibility of the UK withdrawing from the EU without a ratified agreement in place.  They should be able to provide you with details of their contingency arrangements.

If you have any concerns about your insurance policy, your insurance provider should be able to provide you with details of their arrangements to ensure continuity of service. 

If you have any concerns about your insurance policy, your insurance provider should be able to provide you with details of their arrangements. They should be able to tell you whether you can amend policies, or how they will pay claims associated with policies, written prior to Brexit.

Since the UK voted to leave the EU, the Central Bank has actively engaged with insurers conducting business in Ireland, setting out the need for them to have adequate contingency plans in place to ensure service continuity.

Most recently, in late 2018, arising from our concerns about levels of preparedness, the Central Bank instructed insurers and brokers to:

• Take appropriate contingency measures to ensure the continuity of services for cross-border insurance policies between the UK and other Member States of the EU
• Inform existing and new customers and beneficiaries of the implications of these contingency measures
• Provide customers with clear information on the contingency measures taken or planned and how they might affect policies.

The Central Bank is also working closely with UK and European regulators to exchange information about firms’ plans and actions needed to address any consumer protection concerns.

The Central Bank has worked with the Department of Finance to protect customers of insurance products in event of a “hard” or “no deal” Brexit.

Provisions in the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019 allow for a temporary run-off regime, which will allow certain UK/ Gibraltar insurers and brokers to continue to service existing insurance contracts with Irish policyholders in the event of a “hard” or “no deal’’ Brexit.  The legislation does not allow these firms to write new business, including renewing existing policies; it is exclusively for servicing contracts (policies) that were in place prior to Brexit.

Brexit will affect banks, as it will affect other companies, particularly those banks that have exposures in the UK. The Central Bank and the European Central Bank’s Single Supervisory Mechanism are working to ensure that banks have clear strategies and actions to address issues arising from Brexit, particularly in the light of a potential “hard” or “no deal” Brexit. This includes managing:

• The potential impact on banks’ exposures to UK markets.
• The potential impact of any negative spillover to the Irish economy.
• Potential changes in regulatory constraints on transactions between EU and UK firms.

The Central Bank continues to engage with banks to make sure that they appropriately address the risks posed by Brexit and engage proactively with their customers. In addition, the Central Bank continues to monitor the resilience of banks to ensure they have sufficient financial resources and operational capacity to continue to operate effectively.

If you have an account with a bank authorised to carry out banking business in Ireland by the Central Bank, then it should not be affected by Brexit. The list of banks authorised by the Central Bank can be found here.

If you have a bank account with a bank authorised in the UK, your bank should be taking the necessary steps to prepare for the possibility of the UK withdrawing from the EU without a ratified agreement in place. If you have a UK bank account whose status could be affected by Brexit your bank should have already contacted you.  This includes the UK subsidiaries of Irish banks and branches of UK banks operating in Ireland.  If you have any concerns, we recommend you contact your bank to find out what plans they have in place.

No. Once the UK leaves the EU, deposits held in accounts in a UK branch of an Irish credit institution will no longer be covered by the Irish Deposit Guarantee Scheme. It is expected that UK branches of Irish credit institutions will become members of the UK Deposit Guarantee Scheme, which is called the Financial Services Compensation Scheme (FSCS).

Further information is available from www.fscs.org.uk.

UK Investment firms with Irish clients should be taking the necessary steps to prepare for the possibility of the UK withdrawing from the EU without a ratified agreement in place. We recommend you contact your firm to find out what plans they have in place.

Our assessment is that any issues that could potentially have a significant impact on the main payment systems currently serving the Irish market and / or Irish payment services users have been effectively mitigated.

However, in a “hard” or “no deal” Brexit it is possible that some services provided by UK banks, payment institutions and e-money institutions to Irish payment services users could be disrupted unless these firms have taken mitigating actions due to the likely loss of passporting rights.  Where payment services firms have not yet engaged with the Central Bank, we have written to them advising that, in the event of a “hard” or “no deal” Brexit, they must have the necessary authorisation(s) to continue operating in the Ireland.

The Single Euro Payments Areas (SEPA) means that cashless euro-denominated retail payments can be made across the EU and EEA under the same basic terms and conditions.

On 7 March 2019, the UK’s application to remain in the geographical scope of SEPA schemes was approved. This means that Euro SEPA payments to UK firms can continue to be made through existing arrangements.

The Central Bank has a clear responsibility to address the implications of Brexit for the financial system.  This includes taking a rigorous and efficient approach to the authorisation and supervision of firms seeking to set up or expand operations in Ireland.  It also includes assessing and mitigating the financial stability risks associated with disorderly Brexit scenarios.

Financial stability risks arise from direct exposures to the UK market but there are also indirect exposures.  For example, many firms in Ireland are vulnerable to interruptions in international supply chains and increased competition from UK firms in the event of a further sharp fall in Sterling.

If a disorderly Brexit scenario results in an extended period of uncertainty about the future UK-EU relationship it would have a chilling effect on investment plans and be associated with a decline in a broad range of asset prices.
Whatever form of Brexit materialises, the economic impact on Ireland will be negative and material. Uncertainty remains regarding the extent of the impact, which will depend on the timing and nature of the changes to trading arrangements as well as the capacity of the economy to adjust to the new arrangements.

A “hard” Brexit – whereby the UK reverts to trading on World Trade Organisation (WTO) rules – would have the most severe negative impact on the Irish economy.

However, even a more favourable Brexit outcome, with a free-trade deal or customs union type arrangement, would result in a loss of output in the Irish economy and higher unemployment.

As Brexit draws closer, the resolution of the current uncertainty about the nature of the future UK-EU relationship has the potential to generate further economic and financial volatility, especially if there is an increasing likelihood of a harder version of Brexit.