02/03/2026
Insights Blog

Background 

On 26 February 2026, the Central Bank of Ireland (the “Central Bank”) published its Regulatory & Supervisory Outlook Report 2026 (the “2026 Report”). The Report sets out the Central Bank’s assessment of the key risks facing the Irish financial system and outlines its supervisory priorities in response. As in previous years, it is intended to inform the ongoing decision‑making of boards and senior management of regulated entities, including investment funds and fund management companies (“FMCs“).

The 2026 Report is framed against a backdrop of geoeconomic fragmentation, heightened geopolitical uncertainty and accelerating technological change, which the Central Bank considers to be reshaping both the structure of the financial system and the risk landscape for firms and investors. The Central Bank highlights that operational risks remain very high, and that asset valuation, market, and data‑related risks have increased relative to last year.

As with prior reports, the Central Bank expects senior decision‑makers to incorporate the Report, together with related communications such as the “Dear CEO” letter issued by the Central Bank the same day, into their governance, risk management and strategic planning processes.

 

Funds Sector

In its overview of the Irish funds sector in the 2026 Report, the Central Bank notes that it is operating in a fast-evolving landscape facing into a sustained period of transformation across many aspects including evolving regulation, increases in complex product offerings and digital transformation. The size and ever-increasing complexity of the funds sector present a broad range of risks which require continuous monitoring and oversight. As such, the effectiveness of governance, risk management and operational resilience frameworks across the funds sector remains a Central Bank priority in 2026.

 

Supervisory Priorities and Planned Activities

The Central Bank advises that supervisory activities across the funds sector will be undertaken at firm level for those subject to ‘close and continuous’ supervision, and at a sectoral level for others, supplemented by firm-specific work as appropriate.

Planned activities for the funds sector cover seven supervisory focus areas. These include thematic reviews across a range of risk areas with a particular focus on the effectiveness of governance including delegation and outsourcing frameworks, oversight and control of cyber and operational resilience, liquidity and leverage risk, and asset valuation.

 1. Governance and risk management

  • Continuation of the assessment of delegation in FMCs.
  • Conclude the review of the effectiveness of fund administration and depositary management of outsourcing.
  • Review of governance and board effectiveness, as well as the compliance functions, in fund administrators and depositaries.
  • Supporting the transition to AIFMD II for funds and fund service providers (“FSPs”).

 2. Operational and cyber resilience

  • Focus on FMC and FSP implementation and monitoring of the requirements of DORA.
  • A risk-based approach to AML/CFT/FS will continue into 2026 through supervisory data requests including the new, enhanced Risk Evaluation Questionnaire (“REQ”).
  • A thematic inspection focused on transaction monitoring and suspicious transaction reporting.
  • Engagement on the execution by impacted depositaries of their CRD VI compliance plans.

 3. Asset valuation and market risks

  • Responsive supervision of firms’ operating processes and arrangements, with a focus on capacity to respond effectively to stresses in market conditions.
  • Deeper dive into the appropriateness of industry approaches and processes for monitoring investment restrictions and reporting regulatory breaches.
  • Value at Risk (“VaR”) model review with a focus on UCITS that opt to the use of the VaR approach and the effectiveness of the levels of oversight by depositaries.
  • Review of valuation oversight with a focus on hard to value assets and the oversight role of the depositary.

 4. Liquidity and leverage risks

  • Review on liquidity risk management in bond funds to assess how firms manage the mismatch between investor redemptions and asset liquidity.
  • Review the progress of relevant AIFMs on leverage reduction and maintenance plans across property funds.
  • Property funds questionnaire issued in Q1.

 5. Product costs and disclosures 

  • Continued engagement both domestically with regulated firms in the funds sector, and internationally with ESMA, on costs and fees with a focus on value for money. Ongoing supervisory engagement where breaches relating to inappropriate cost/fee structures or disclosures have been identified.
  • Gatekeeping levels of costs and transparency for prospective investors.

 6. Data and artificial intelligence 

  • Continued enhancement and use by the Central Bank of fund data and risk models to deliver a data-led and risk-based approach to the effective and efficient oversight of the funds sector.
  • Continued engagement to understand firms’ approach to and usage of AI in their business models.

 7. Climate and ESG-related risks 

  • Sustainability work will continue using the Central Bank’s ESG dashboard tool to assess firms’ compliance with SFDR.
  • Compliance with ESMA’s fund naming guidelines will continue to be monitored.

Our Financial Regulation group has also shared their sector-specific insights on the Report, for more please see here.

For further details on the 2026 Report, please contact your usual Arthur Cox contact.