Financial Services Advisory

CBI Letter to Minister for Finance: Financial Regulation Priorities 2023

Dwayne Price
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On January 17th, the Central Bank of Ireland (‘CBI’) issued a letter to the Minister for Finance Michael McGrath outlining the Central Bank’s regulatory priorities for the new year alongside its views on the macro-financial environment and the financial services landscape.

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The priorities relate mainly to Banks, Funds, Financial Firms, Non-Banks, Payment and E-Money institutions, Credit Unions, and Crypto Assets markets.

As stated by the CBI, the outlook for the year ahead remains clouded by uncertainty and challenges continue in the macro-financial environment, with the sharp and persistent increase in inflation leading to shocks on people’s real income and erosion of living standards. It is believed that global markets will remain vulnerable to further shocks, especially those to asset prices. The potential vulnerabilities spread across different parts of the global financial system, including non-bank financial systems where leverage or liquidity mismatches tend to be higher. Nonetheless, Ireland remains a global financial centre that has seen evident growth.

The Central Bank’s focus continues to be on ensuring that the financial system and firms operate in a way where the interests of consumers and users are protected and supported. The priorities for financial regulation for 2023 involve constant engagement with the Department of Finance on common interests and the assurance that the regulation continues to be forward-looking, connected, proportionate, predictable, transparent and agile.

Engagement with the Department of Finance

There are numerous areas where the Central bank and Department of Finance will continue to engage.

Areas of focus
Recommendations of the Retail Banking Review
EU policies and proposals
Recommendations made by the International Monetary Fund
Opportunities and risks originated from the further development of the international financial services sector

As the financial system continues to change, there will be a need for financial literacy and education to continue to support consumers. The engagement with the Department of Finance will also help to ensure the effectiveness of Ireland’s approach to the EU’s sanctions regime.

Priorities for financial regulation for 2023

The priorities formulated by the Central Bank will help to support its strategic objectives and the need to respond to the dynamic and growing financial services system in Ireland.

These priorities are listed below:

Consumer Protection Framework

Consulting and engaging widely on the development of the Central Bank's consumer protection framework

Change to credit union regulations/guidance

Implementing these changes arising from the Department of Finance-led Policy Framework Review, including through engaging with sectoral stakeholders

Innovation Hub

Publishing a consultation paper on the Central Bank's Innovation Hub that will include an exploration of new ways of engagement with innovators and their products

Climate change risks

Strengthening the resilience of the financial system to these risks and its ability to support the transition to a climate-neutral economy, implementing the EU's SFDR

EU's Anti-Money Laundering Action Plan

Ensuring that the plan, including the establishment of a single supervisory authority (the AML Authority), results in a consistent and robust EU-wide framework

Payment Services Directive

Contributing to the review of the PSD2 and the functioning of open banking

Digital operational resilience and crypto assets

Implementing new EU regulations on digital operational resilience and markets in crypto assets

Systemic risks generated by non-banks

Progress actions on these risks, advancing the development of a macro-prudential framework for non-banks, legislative frameworks improvement and investor protections

Individual Accountability Framework

Consulting on the operationalisation of this framework to ensire it is properly embedded by firms and individuals, to enhance governance and standards of behaviour

Enhancing the governance, oversight and investor outcomes in the funds sector

Including the implementation of new ESG requirements and measures to mitigate greenwashing risks

The implications of the UK's Overseas Funds Regime

To ensure that Irish domiciled funds can continue to service UK investors

The 2023 supervisory priorities share common ground with the ones of last year regarding consumer protection, innovation, climate change, and PSD2, and while the previous priorities focused mainly on the banking sector, the ones for this year spread across different sectors of the financial system, focusing on banking and non-banking sectors.

With the development of these priorities, the Central Bank aims to guide financial firms, consumers, and investors, in navigating the challenges arising from the current dynamic financial services system. The priorities include the assessment and management of financial and operational resilience risks to ensure fair outcomes for consumers and investors, and continuing to detect and section market abuse. Although these priorities are in line with the Central Bank’s strategic objective, it is yet to see how they will unfold throughout the year given the current financial landscape

Why Grant Thornton

Grant Thornton’s Financial Services , Consulting and Advisory teams have supported a number of investment firms with understanding, preparing for and implementing the new prudential framework. In particular, our prudential risk experts have extensive knowledge of the relevant legislation and guidance and the challenges these pose to your firm.

Our experts can help your firm assess its regulatory requirements arising from the new regime and advise on methods to ensure full compliance balanced with your business needs.