CBI regulatory and supervisory outlook and supervisory priorities

The Central Bank of Ireland (CBI) has released the first iteration of what is to be an annual report, detailing the key risks and trends they have identified to be facing the financial sector in Ireland.

The report includes the CBI’s supervisory priorities for 2024 in the context of those risks and trends. Additionally, the CBI has published the list of key financial regulation initiatives communicated to the Minister for Finance in January 2024.

Key takeaways

The report summarises the CBI’s assessment of major global macroeconomic developments and associated risks shaping regulatory and supervisory priorities. Key risks are classified under three themes:

  1. The macroeconomic and geopolitical environment.
  2. How regulated entities are responding to today’s changing world.
  3. Longer-term structural forces at play.

The supervisory priorities, as detailed below, are set in the context of the macroeconomic environment and key risks outlook and provides the regulator’s overarching list of priorities for the year. The priorities are also informed by the priorities set out at the level of the European System of Financial Supervision and ECB (European Central Bank) Banking Supervision Single Supervisory Mechanism (SSM) priorities.

Supervisory priorities

Priority 1: Proactive risk management and consumer-centric leadership of firms
The CBI expect the leadership of regulated entities to adopt a more proactive and forward-looking approach to managing the risks and uncertainties facing their organisations and their customers. This leadership aspect is a priority to the CBI and aligns with the recent introduction of the Individual Accountability Framework.

Priority 2: Firms are resilient to the challenging macro environment
Regulated entities are expected to be resilient and well-prepared in the face of risks in the macro environment, including the impact of further interest rate rises, economic uncertainty and the potential for further deterioration in asset values. The CBI expects firms to illustrate appropriate prudency when assessing key macroeconomic risks and ensure they are appropriately mitigated through the use of robust assessment and scenario testing.

Priority 3: Firms address operating framework deficiencies.  
The CBI will aim to ensure deficiencies identified in the governance, risk management and control frameworks of firms are addressed to ensure they are effective and future-proofed. This should include a focus on asset and liability management, financial and operational resilience, and Anti Money Laundering (AML)/Counter Terrorist Financing (CTF) frameworks.

Priority 4: Firms manage change effectively
Regulated entities are expected to keep pace with changes in the financial system and consumer needs and expectations through the well-managed evolution of their business strategies. Firms should ensure they keep up to date business plans, assess market disrupters impact on business models, maintain appropriate cybersecurity controls and ensure an appropriate change management programme is in place for an evolving regulatory framework and operational environment.

Priority 5: Climate change and net zero transition are addressed
The CBI is prioritising the need for regulated entities to improve their response to climate change and enhance their role in the move to a net zero economy. This includes entities’ risk management practices for physical and transition risk, business planning and strategy and greenwashing mitigation.

Priority 6: The Central Bank enhances how it regulates and supervises
The CBI is aiming to improve and transform its approach to regulation and supervision. This will include enhancements to the authorisation process, continuing to develop a tailored, proportionate and responsive regulatory framework, taking account of the provisions in forthcoming legislation developments such as Digital Operational Resilience Act (DORA) and Markets in Crypto Assets Regulation (MiCAR) and continue to implement the Individual Accountability Framework (IAF).

Financial regulation priorities for 2024

Additionally, the CBI has published their financial regulation priorities for 2024 in conjunction with this report. The priorities were included in a letter addressed to the Minister for Finance in January 2024.

The below priorities are focussed on specific regulations and legislation as opposed to the overarching supervisory priorities.

  • Putting in place a revised and modernised Consumer Protection Code.
  • Continuing to progress work to address systemic risks from the non-bank sector.
  • Implementing the IAF.
  • Preparing for the implementation of DORA.
  • Implementing the Markets in Crypto Asset Regulation (MiCAR).
  • Implementing the Credit Unions (Amendment) Act 2023.
  • Developing policy work and supervisory expectations related to the use of Artificial Intelligence (AI) in financial services, including preparing for the implementation of the EU's AI Act.
  • Working with and supporting the Department of Finance on:
    • The continued implementation of the Retail Banking Review.
    • The development of a framework to protect consumers' and business's access to cash the resilience of the cash system.
    • The National Payments Strategy.
    • The completion of the 2030 funds review.
    • The Financial Literacy Strategy.
    • Key international policy files including in the areas of banking, payments, capital markets, anti-money laundering and sustainable finance.

How can we help?

Our prudential risk experts recognise that regulations remain a pivotal driver for the strategic priorities of financial institutions. We specialise in assisting clients within the financial services sector in navigating the intricate web of regulations. We work in tandem with our clients to identify their regulatory responsibilities and develop strategies for full compliance.

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