There is a tendency to think of finance as something that simply happens.

Markets move. Capital flows. Investments are made.

The reality is different.

Modern finance is designed.

Over the past week, The Currency’s Finance by Design series has examined some of the structures that underpin Ireland’s financial services industry. What emerges is not a story about taxation or regulation. It is a story about scale.

Consider the numbers.

Irish real estate investment funds (Irefs) hold €26.8 billion of assets, an increasing amount of which has been funnelled into residential property. Section 110 companies, a structure initially designed to aid securitisation, house assets in excess of €1.1 trillion. 

Aviation-leasing companies manage assets worth €268 billion. Finance and insurance firms carry forward more than €102 billion in accumulated losses that continue to shape future tax liabilities.

Taken individually, each figure is striking. Taken together, they reveal something more significant: the extent to which Ireland has become a jurisdiction designed to attract, house and manage global capital.

None of this happened by accident.

Successive governments made policy choices. Civil servants drafted legislation. Regulators developed frameworks. Companies and entrepreneurs identified opportunities. Over time, a collection of legal, regulatory and tax structures evolved into one of the most sophisticated international financial services ecosystems in Europe.

There is nothing inherently wrong with this. Indeed, it represents one of the State’s greatest economic successes.

Aviation leasing is a global industry that Ireland helped create. Section 110 companies have become a central component of European capital markets activity. Irefs have channelled billions of euro into Irish commercial and residential property. The wider funds industry has established Ireland as a key gateway for international investment into Europe.

The reporting in this series also highlighted something else.

Visibility.

Again and again, questions have surfaced not about the legitimacy of the structures themselves but about the ability of policymakers, regulators, and the public to fully understand them.

The Central Bank, in its submission to the Department of Finance’s 2024 Funds Review, highlighted the complexity of parts of the special-purpose entity sector. The review itself recommended greater transparency around the use of Section 110 companies. Revenue and the Government have repeatedly tightened anti-avoidance measures in relation to property funds. Policymakers continue to debate how investment structures should be taxed and supervised.

These are not signs of a system under strain.

Rather, they are signs of a system that has become extraordinarily sophisticated.

Ireland has become exceptionally good at designing financial structures. The challenge now is understanding the consequences of that success.

That challenge is different from the one policymakers faced 20 or 30 years ago. Then, the objective was to attract international capital and persuade investors to locate activities here. On many measures, that challenge has been met.

The challenge now is ensuring that transparency and understanding evolve alongside scale.

That matters because finance increasingly shapes areas of the economy that extend far beyond the IFSC.

One of the more striking findings from this series was not how much tax was paid, or indeed how little. It was how often the debate returned to the same underlying questions.

What exactly are these structures doing?

Why were they created?

Who uses them?

And how do they fit into the wider economy?

They are questions that arise naturally when sectors measured in the tens of billions, hundreds of billions, and, in one case, more than a trillion euro operate largely beyond public view.

Every successful financial centre faces the same tension. The structures that attract capital often become increasingly complex. The challenge for regulators is to maintain oversight. 

Ireland deliberately built these structures.

They succeeded.

Their success has created new challenges around transparency, oversight and public understanding.

Elsewhere last week…

In a major intervention in the takeover battle for DCC on Friday, the company’s founder, Jim Flavin, chose The Currency and the Financial Times to speak out against the offer put on the table by private-equity firms KKR and Energy Capital Group. He spoke with Tom.

Jonathan was in Strasbourg this week as Ireland launched its presidency of the EU before the European Parliament. There, he heard MEPs’ concerns over exports of alumina to Russia from the Aughinish plant in Co Limerick, reported on the pressure building on the Irish Government to seal a deal on the EU’s budget this year, and caught up with Commissioner Michael McGrath on plans to implement the EU Inc single-registration regime for start-ups to operate and raise funds across Europe.

After the funeral of Glen Dimplex’s founder Martin Naughton took place on Thursday, Ian Hyland reflected on the passing of a titan of Irish business. His perceptive tribute shows that the multinational he founded was just one facet of a man who “never allowed success to define who he was”.