CBI publishes updated supervisory document

The Central Bank of Ireland (Central Bank) has published an updated version of its ‘Our Approach to Supervision’ document (Supervisory Document).

Although the updates are largely intended to clarify the Central Bank’s approach, the revised document also contains several notable changes, which are outlined further below. Unsurprisingly, the Central Bank’s safeguarding outcomes and supervisory principles are unchanged, and its supervisory approach remains outcomes focused and risk based.

Key changes in the Supervisory Document

• In relation to the Central Bank’s outcomes focused approach, the Supervisory Document now states that:

“The Central Bank does not operate a no-failures regime, rather it works to ensure that firms effectively identify and manage risks and mitigate the impacts on consumers, investors and the wider economy should risks crystallise” and it will take “enforcement action where appropriate”.

• In relation to the risk-based approach, the Supervisory Document now states that:

“Risk-based supervision focuses on the most material risks to achieving our safeguarding outcomes. It uses data, judgement, insight and challenge. It does not mean adopting a defensive or reactive strategy focused on risk elimination (which would not be possible). It means adopting a proactive and forward-looking approach, setting clear objectives and then identifying and responding to the risks that can prevent the achievement of those objectives. Risk-based supervision focuses on remediating issues and delivering fair outcomes. It uses our full supervisory toolkit - including enforcement - and ensures firms take responsibility for identifying and managing the inherent risks of their business to their own sustainability, to consumers and investors and to the wider financial system.”

• The Supervisory Document more clearly distinguishes between ‘sectoral’ supervision and ‘close and continuous’ supervision:

i. Sectoral supervision means that the Central Bank considers each sector, as a whole, across the safeguarding outcomes and considers what risks, issues, trends and vulnerabilities should receive supervisory focus over a multi-year period.

ii. Under close and continuous supervision, the Central Bank has identified several individual firms, from within specific sectors, that could have a significant impact on the achievement of the safeguarding outcomes. Due to that significance, the Central Bank supervises these firms more intensely at an individual level. Any firm that is subject to supervision at an individual level has been advised of this by the Central Bank.

• In some cases, although a firm may not be subject to close and continuous supervision, the Central Bank may determine that a firm will receive targeted, more intensive supervision for a period of time due to reasons such as the maturity of the firm, past supervisory experience, concerns raised about the firm, significant changes to a firm’s business model, etc.
• Firms subject to close and continuous supervision will continue to be supervised at an individual level by multi-disciplinary teams. The Supervisory Document clarifies that they will also be supervised under the sectoral supervision approach. In addition, the factors that determine if a firm may be subject to close and continuous supervision and the risk categories that they are assessed under remain unchanged.
• The Supervisory Document confirms that the Central Bank continues to take a targeted and proportionate approach to the use of its enforcement powers, but it no longer includes the statement that “Strong enforcement outcomes serve to hold regulated firms and individuals to account, deter poor practices, achieve compliance, and promote the behaviours the Central Bank expects of the financial services sector.”
• The Supervisory Document specifically references the Individual Accountability Framework and the role of the Board in contributing to good culture:

“An effective culture of risk management in firms is a crucial prerequisite for a trustworthy financial services system i.e. responsibility for risk identification, management and mitigation rests first and foremost with the boards and management teams of firms. The Central Bank expects that good governance and proactive risk management are priorities for firms and their boards, embedding these throughout the firm through an effective culture. In this context, the Central Bank’s Individual Accountability Framework (IAF) is designed to improve governance, performance and accountability in firms by establishing a framework of enhanced clarity as to who is responsible for what within firms. By setting the tone from the top, both through their interactions with the executive and by making an effective culture an integral part of the firm’s strategy, boards can make a powerful contribution to establishing a strong ethical and cultural environment throughout. Firms are responsible for managing how they meet their legislative requirements and the Central Bank’s requirements and expectations.”

If you have questions on what these updates mean for your firm, or if you would like to discuss supervisory engagement, please reach out to Dario Dagostino, Partner, Eoin O Connor, Partner, Patrick Brandt, Partner, Mark Devane, Partner, Eimear O’Brien, Partner, Chloe Culleton, Partner, Louise Hogan, Partner, Sarah Lee, Senior Practice Development Lawyer or your usual ALG contact.

Date published: 3 June 2026