Makhlouf: Capital goes where the opportunity is, and stays where it is trusted

Central Bank of Ireland Governor Gabriel Makhlouf today (Thursday 1 October) spoke at the Irish Funds Annual Global Funds Conference, where he set out why deeper, more integrated European capital markets matter for Irish households and the wider economy. Delivering this requires the financial services sector to take their opportunities, while ensuring trust is maintained.

Governor Makhlouf said: "Capital goes where the opportunity is, and it stays where it is trusted."

Reiterating that creating opportunity is Europe's task, by delivering a single market in goods, services and capital, and building capital markets deep enough to retain European savings and attract investment from abroad, he said the sector should take its opportunities related to technology and retail participation. “Innovations have the potential to transform our monetary and financial system. But for innovation to live up to its opportunity, it must be done well, with appropriate safeguards.”

Turning to retail participation he said it could “be supported through well-designed and appropriate products, clear information, a strong regulatory framework and increasing levels of financial awareness, understanding and literacy. This is clearly in the long-run benefit of both our citizens and the economy, and so it is important we get it right.”

Three resilience priorities for the funds industry

As the sector takes these opportunities, Governor Makhlouf said the responsibility on the industry and regulators will only grow, and that maintaining public trust in innovation and in the financial system is a task for both.

Noting that resilience underpins that trust, he called on the funds industry to focus on three areas:

• Resilience to shocks: The sector has navigated recent stress well, but the Governor cautioned against complacency, pointing to lessons on liquidity management, valuation practices and contingency planning.

• Resilient operations: Noting that “The next disruption will not wait for your operational resilience framework to mature; and given the rapid developments we are seeing in technological capabilities, it may be sooner than you think", the Governor highlighted concentration risk in third-party service providers and called for tested exit strategies and board-level understanding of dependencies.

• Resilient governance: Recognising that the Irish funds sector has been to the forefront in the strength of its governance frameworks, Governor Makhlouf noted that delegation is a valued feature of the European model and emphasised that "Credible delegation must also mean genuine substance: real decision-making capacity, effective oversight of delegates, and senior management with the authority and the expertise to challenge and, where necessary, override the decisions of delegates".

Governor Makhlouf concluded: "Maintaining trust is a task we all share." He called for "a trustworthy industry, well-governed, and resilient – not just for today but prepared for whatever tomorrow may bring."

ENDS