Philip Lane highlights the risks Brexit poses for Ireland's economy

He also said that a flight of financial firms from London is likely if there is a hard Brexit

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File photo: Central Bank Governor Philip Lane. Photo: /RollingNews.ie

Governor of the Central Bank of Ireland Philip Lane, today addressed a Reuters Newsmaker event in London on the theme, 'The European Financial System After Brexit.'

The Irish official said that a difficult breakup with the EU which results in it losing access to the EU's market will result in a fractured flight of financial business from London to a number of different cities rather than one alternative hub.

"If UK resident firms are no longer treated as equivalent to EU firms for regulatory purposes, it is likely that significant migration of activity from the UK to the EU would occur," he told the audience in London.

"In a post Brexit environment, it is unlikely that financial activity will cluster in a single location in the euro area, since no individual location offers a close substitute to London ... The decentralised nature of the Eurosystem, with monetary operations largely executed through the national central banks, may also facilitate a multi-polar financial system in the euro area," Mr Lane continued.

He said the Brexit represents a "major downside risk" for the Irish economy.

Mr Lane added that progress on a European Capital Markets Union (CMU) is more important than ever as the UK prepares to leave - this will increase integration between EU economies.

"This is essential if the euro area is to reap the benefits from a more balanced financial system, in which equity and bond markets offer an alternative to banks in intermediating funds between savers and investors," he commented.