Insights Blog

The Central Bank’s Annual Report 2021 and Annual Performance Statement 2022, published yesterday (30 May 2022), gives a useful summary of the Central Bank’s priorities for the year ahead, following on from the publication of its Strategic Plan in November 2021 (read our update on that plan here).

Key Themes

Lessons learned from COVID-19

The Central Bank carried out a ‘lessons learned’ exercise as the COVID-19 restrictions eased, which is likely to inform its strategic approach going forward.  Key learnings from that exercise related to: information on the varied levels of resilience and vulnerabilities in financial sectors; the role of policy actions in mitigating household and firm distress; the level of crisis preparedness among regulated firms; the business interruption insurance market; further interconnections and linkages in the financial system; and the use of high frequency data to support economic analysis.

Technology and the transition to net zero remain key priorities

The Central Bank is particularly focused on the pace of technological innovation, noting the benefits that this will have for consumers and the Irish economy, but also flagging that inherent risks will need to be managed.  As previously signalled, the Central Bank is reviewing its Innovation Hub. It will also continue to work on developing its regulatory framework to reflect advances in cryptoassets and distributed ledger technology, work with the Department of Finance to prepare for Irish implementation of MiCA (the proposed EU regulation on markets in crypto-assets) and DORA (the proposed EU legislation on digital operational resilience), and look at authorisation criteria for investment funds that offer investments in crypto assets.

The transition to a net zero economy also remains a priority. The new Climate Change Unit established by the Central Bank in 2021 has a broad work programme, covering sustainable finance, macro-financial linkages, the ‘safety and soundness’ of regulated firms to climate change, and filling data gaps.  The Central Bank will continue to supervise firms closely to ensure that they are adapting their business models in light of growing climate and transition risks.  The need for high standards in the area of disclosures when ‘green’ financial services products are being developed and marketed is also a priority.  The Central Bank’s Climate Risk and Sustainable Finance Forum, which will bring stakeholders in climate change and sustainable finance together to share knowledge and best practice, is expected to meet for the first time in June.

Culture and Conduct

We can expect to see consultations by the Central Bank once the legislation that will establish the new Individual Accountability Framework is finalised (for our updates on this area, see the dedicated page on our website: Financial Regulation: Individual Accountability and SEAR). The Central Bank has also signalled its plans to use its ‘full supervisory toolkit, including enforcement powers’ where needed.

For further information on the above key themes, read our earlier updates here:

Crypto-assets: EU and Irish regulatory warnings; MiCA moves ahead; Innovation Hub Report

E-Money Institutions and Payment Institutions: Central Bank confirms its supervisory expectations

Individual Accountability; Women in Finance; Diversity; Climate – Key financial services themes this week

Planning for Individual Accountability and Improving Diversity: Key themes from Central Bank speeches this week

What’s in store for 2022 from a financial regulation perspective?

What else can we expect from the Central Bank in 2022?

  • The review of the macro-prudential mortgage measures (see our update here) will conclude, with output expected in November.  The Central Bank will also finalise its review of the macro-prudential capital framework for banks, and continue its work on developing a macro-prudential framework for investment funds.
  • Work will continue in the areas of financial and operational resilience, in particular on cyber resilience, critical infrastructure and outsourcing.  See our update here for more information: Central Bank of Ireland sharpens focus on operational resilience.
  • A discussion paper on a review of the Consumer Protection Code is expected over the summer months.
  • Changes to the regulatory framework to take account of the recent expansion of the Central Bank’s supervisory remit will continue (see our previous updates: New authorisation framework commenced for Hire-Purchase, Consumer Hire, PCP and Buy-Now-Pay-Later providers and servicers and Crowdfunding: Central Bank launches new regulatory framework). ESMA has recommended an extension to the transition period under the EU Crowdfunding Regulation, but only for in-scope crowdfunding service providers who submit their authorisation applications before 1 October 2022.
  • There will be extensive supervisory engagement in relation to the exits of KBC and Ulster Bank, the management of long-term mortgage arrears, and business interruption insurance.
  • Work will also continue to prepare for the changes to the EU AML/CFT regime, which are expected to take effect in 2025 (see our update on those proposals here).
  • Work will continue on the proposed digital euro, and on contributions to the Commission’s recently launched reviews of the revised Payment Services Directive and the functioning of the open finance framework.
  • Engagement will continue with the Department of Finance on various legislative developments including CRR3/CRDVI, the Solvency II review, the AIFMD review, and the MiFID review.

Other expected focus areas, based on recent activity by the Central Bank, are covered in our other recent updates:

Structured Retail Products: Central Bank sets out its expectations and next steps for investment firms

Securities Markets in 2022: MAR, Sustainability, Governance and Innovation are focus areas for the Central Bank

Central Bank sets out its 2022 Supervisory Priorities and Expectations for the Funds Sector

Key Central Bank Roles

Publication of the Report was followed by an announcement that Sharon Donnery (Deputy Governor for Central Banking) will move to the new role of Deputy Governor (Financial Regulation) and lead on the Central Bank’s transformation of its approach to supervision and regulation.  Her role will also cover prudential regulation (until now, Ed Sibley has served as Deputy Governor (Prudential Regulation) but he is departing the Central Bank shortly).  The role of Deputy Governor for Central Banking will be re-named to Deputy Governor (Monetary and Financial Stability) and will be filled by Mark Cassidy on an acting basis until a replacement for Ms Donnery is confirmed.  The title of Derville Rowland’s role (Director General Financial Conduct) will change to Deputy Governor (Consumer and Investor Protection) to reflect “the importance of consumer and investor protection at the heart of the Bank’s mission and strategy”, and Ms Rowland will continue in that role.

Please get in touch with any member of our market-leading Financial Regulation Group, or our market-leading Financial Regulation: Investigation and Enforcement team, if you wish to discuss any of these strategically important areas on your business.