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Central Bank Dear CEO Letter on Financial Regulation Priorities for 2023

February 2023

On 16th February 2023, the Central Bank issued a Dear CEO Letter setting out its key regulation and supervision priorities for 2023.

The Letter first highlights the challenging macro-financial environment and the risks facing the financial system and global markets, which were also highlighted in the Central Bank’s most recent Financial Stability Review. The Central Bank expects the Irish economy will continue to experience positive (although lower) growth in 2023 and notes that it is facing increased downside risks given the size of the energy and inflation shock and the slowdown in the global economy. The Central Bank confirms that this economic context will be central to their regulatory focus in 2023 to ensure the financial system and firms operate to support the interests of consumers and users as they cope with those risks and challenges.

The Letter then identifies the Central Bank’s key 2023 regulatory and supervisory priorities as follows:

1. Authorisations 
    
   The Central Bank aims to provide a clear, open and transparent authorisation process through active and constructive engagement with industry and other stakeholders. It is focused on creating the regulatory context in which the potential benefits of innovation for consumers, investors, businesses and society can be realised, while the risks are effectively managed and mitigated.
   
   
2. Operational Resilience
    
   The Central Bank will be assessing and managing risks to the financial and operational resilience of firms. This includes the potential decline in asset quality arising from prevailing inflationary pressures, lingering effects from the pandemic and a slowdown in the UK economy.
   
   
3. Non- Banking Sector 
   
   Actions on the systemic risks generated by non-banks will be progressed, in particular by advancing a macro-prudential framework for non-banks and improvements to legislative frameworks and investor protections in the investment fund sector.
   
   
4. Banking Sector 
   
   The Central Bank will continue to oversee the consolidation of the Irish banking sector and associated programme of account migration, implement new credit supervision mandates and continue to monitor for emerging risks in relation to distressed debt, investor protection and product governance.
   
   
5. Engagement 
   
   The Central Bank will continue to consult and engage on regulatory developments under the Consumer Protection Framework and Individual Accountability Framework leading to enhancements in existing and new regulations.
   
   
6. Credit Unions 
   
   Changes will be implemented to credit union regulations/guidance arising from the Department of Finance-led Policy Framework Review, including through engaging with sectoral stakeholders.
   
   
7. Innovation 
   
   The Central Bank will consult on its approach to innovation that will include an exploration of new ways of engagement with innovators and their products.
   
   
8. AML & Sanctions 
   
   There will be ongoing focus and vigilance around the integrity of the financial system and preventing misuse through detecting and sanctioning market abuse, supervising firms’ compliance with Anti-Money Laundering/Combating the Financing of Terrorism obligations and administering and enforcing financial sanctions (working closely with An Garda Síochána and other relevant bodies in all these areas). 
   
   The Central Bank will also be ensuring that the EU’s Anti-Money Laundering Action Plan, including the establishment of a single supervisory authority (the Anti-Money Laundering Authority (AMLA)), results in a consistent and robust EU-wide framework.
   
   
9. EU Regulation 
   
   The Central Bank will be contributing to progressing European regulation, particularly the review of the Payment Services Directive (PSD2) and the functioning of open banking, as well as implementing new EU regulations on digital operational resilience (DORA) and markets in crypto assets (MiCA).
   
   
10. ESG 
    
    The Central Bank will be aiming to strengthen the resilience of the financial system to climate change risks and its ability to support the transition to a climate-neutral economy, along with implementing the EU’s Sustainable Finance Disclosures Regulation.

If your firm has a query regarding any of the key priorities highlighted by the Central Bank above, feel free to contact us at info@regsol.ie

To read the Dear CEO Letter in full, please follow the link below:
Dear CEO Letter - Central Bank's key regulation and supervision priorities for 2023

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