The Irish financial system can cope with a hard Brexit – and the “most significant” firms are already implementing their contingency plans, Irish Central Bank Deputy Governor Ed Sibley said on Thursday.
Ireland is seen as the European Union member state most vulnerable to the threat of an unruly exit by Britain, from the implications for its currently seamless border with the British province of Northern Ireland to the tightly intertwined trade with its nearest neighbour.
“I am satisfied that from a financial stability perspective, these cliff-edge risks are now manageable,” Sibley said in a speech.
“This is not to say that a hard Brexit will not be bumpy for the economy and for the financial system. Indeed, some level of market disruption would be inevitable,” he added.
But he said the financial system could withstand such turmoil.
“The Irish banking system is considerably more resilient than it was, and the most significant firms operating in Ireland across all sectors have, in line with our requirements, prepared and are executing contingency plans for a hard Brexit.”
Sibley added that the risks to Irish consumers from Britain crashing out of the EU in March without a deal are mitigated to the greatest extent possible, but that the central bank was conscious of some remaining risks to the detriment of consumers.
These include the closely connected Irish and British insurance markets that Sibley said had required the central bank and government to draft legislation to protect insurance customers in the event of a no deal Brexit.
While he said the vast majority of Britain- or Gibraltar-based firms have taken appropriate action to ensure they can continue to provide service to Irish consumers, the draft legislation provides for a temporary run-off regime allowing those without appropriate plans to service existing contracts for three years.
The legislation will not allow these firms to write new business, including the renewal of existing policies, and Sibley cautioned that even with the mitigation, the supply of niche insurance products may reduce or end altogether, given the potential increased costs and frictions.
Separately on Thursday, the Motor Insurers’ Bureau of Ireland (MIBI) told road users that their vehicles will need a Green Card to cross the border into Northern Ireland or travel to Britain if it leaves the EU without a deal or some kind of transitional arrangement.
Currently all Irish vehicles can travel seamlessly through Northern Ireland, but MIBI warned motorists that they should contact their insurer or insurance broker one month in advance to ensure they receive the documentation in enough time if the prospect of Britain crashing out of the EU on March 29 remains.