Ireland’s foreign exchange trading market could be at risk from Brexit if it fails to diversify, a leading banking lobby group has warned.
The Irish Bankers Association (IBA) warned in its latest annual review that Ireland needs to be more active in foreign exchange markets to protect the economy.
It said that while it supports a strong banking sector, the need to diversified trading and hedging across different markets is paramount.
This means the banking sector needs to become more active and diversified to reduce the risk of Brexit, IBA chief executive Michael McBride said.
He said the bank has already seen the effects of Brexit.
“Brexit has led to the devaluation of the Irish pound, which has caused a drop in the value of the bank’s foreign currency reserves.”
If Ireland is to avoid the negative consequences of Brexit and regain competitiveness in the coming years, it needs to continue to be proactive in foreign currency markets,” he said.
The IBA warned that Ireland’s currency is also being eroded by the UK’s decision to leave the European Union, leading to a fall in its value.”
We believe the Government has an important role to play in ensuring that the Irish currency remains stable and that we have a strong trading relationship with the UK,” he added.
The bank said that as a result of Brexit the UK is facing a reduction in exports, which is leading to lower revenue and slower growth.”
The Irish economy is already slowing and could be further affected by Brexit,” he explained.
The UK is also facing a fall of 2.2 per cent in the Irish dollar in the first six months of 2018, which would result in an economic downturn of between 2.5 per cent and 3.0 per cent.
Mr McBride also warned that the UK may seek to reduce its financial ties with Ireland to ensure that it does not have to contribute to the European single market and that it is unlikely to have any bilateral trade agreements with the country.”
As the UK negotiates a new trade deal with Ireland, it may also seek to negotiate bilateral trade deals with other countries to ensure its access to the single market,” he warned.