Central Bank publishes Governor’s Financial Regulation priorities letter to the Minister and its new Regulatory and Supervisory Outlook

29 February 2024 Press Release

Central Bank of Ireland

  • Against the backdrop of an increasingly fast-changing and uncertain world, and a global environment characterised by economic and market uncertainty, geopolitical tensions and regional conflicts, the Central Bank has today published its risk outlook and priorities in the area of Regulation and Supervision.
  • Macroeconomic and geopolitical drivers, risks from how firms are responding to a changing world and market, and risks driven by long term structural forces at play, all characterise the risk landscape currently facing the financial sector.
  • In light of these trends and risks, the Central Bank has set out six overarching supervisory priorities, focused on achieving proactive risk management and a consumer-centric approach by the leadership of firms, ensuring firms are resilient in the face of the challenging macro-environment, and that they are appropriately responding to changes underway and ahead.

The Central Bank of Ireland has today (Thursday) published its Regulatory and Supervisory Outlook 2024 (RSO)the first of what will be an annual report setting out the Central Bank’s view on the key trends and risks facing the financial sector, along with the regulatory and supervisory priorities it has set in the context of those risks.

The risk outlook includes its consideration of the global environment within which the financial sector is operating, along with the overarching risk landscape facing the financial system, grouped broadly into the following themes: a) Risks driven by the macroeconomic and geopolitical environment, b) risks driven by the way regulated entities operate and respond to today’s changing world, c) risks driven by longer term structural forces at play.

These risks have shaped the Central Bank’s financial regulation and supervision priorities for 2024 – including six overarching supervisory priorities, complemented by more detailed supervisory strategies for each of the financial sectors within the Central Bank’s remit, providing firms with detail on the Central Bank’s expectations of their sector, as well as what the sector can expect in terms of focused supervisory work.

The RSO and this detailed articulation of the Central Bank’s supervisory priorities follows a letter Governor Gabriel Makhlouf wrote to Minister Michael McGrath in January setting out his views on the macro-financial environment, the financial services landscape and the Central Bank of Ireland’s financial regulation priorities for the year ahead, including:

  • Working with the Department of Finance on priority policy areas including,  continuing implementation of the Retail Banking Review; access to cash; the National Payments Strategy; the completion of the 2030 Funds Review and the National Financial Literacy Strategy.
  • Putting in place a revised and modernised Consumer Protection Code to ensure consumers are protected in a more digitalised financial services sector;
  • Continuing to progress work both internationally and domestically to address systemic risks from the non-bank sector and deepening our analysis and understanding of macroprudential risks in this sector;
  • Implementing the Individual Accountability Framework (including within our supervision of firms) and supporting external stakeholders to embed the new standards;

Welcoming the publication of the report Governor Makhlouf said: “This year’s Regulatory and Supervisory Outlook is published against the backdrop of a fast-changing and uncertain world, and a global environment characterised by uncertainty, geopolitical tensions and regional conflicts.

“While the financial system in Ireland and internationally has, with the help of fiscal and monetary policy, shown financial and operational resilience in the face of the turmoil of recent years,  a number of episodes have demonstrated how a confluence of events can quickly cause distress. These include the market disruption in March 2020, the LDI crisis in Autumn 2022 and the Banking turmoil last year – all uncovering vulnerabilities at an entity and financial system level.

“This points to the need for vigilance by both regulators and firms themselves, in particular in light of the changed macro policy and risk landscape for the period ahead – all of which is informing the priorities of the Central Bank. In addition to my letter to the Minister, the publication of the RSO today sets out in more detail our view of the risk outlook and our supervisory priorities – as a complement to the detailed feedback we give to firms through our sector specific engagement and other publications throughout the year.

“Specifically we want to see the leaders in firms adopt a proactive, consumer-centric and forward-looking approach to managing the risks and uncertainties facing their organisations and their customers. All firms in the financial system need to ensure they are resilient to this challenging and uncertain operating environment, and are appropriately responding to changes underway and ahead.”