CBI Strategy 2021 and a Macro-Prudential Framework for Non-Banks: some points of interest

The Central Bank of Ireland (CBI) published its new Strategy document (the Strategy) which will be effective from January 2022. The Strategy’s four connected themes (future-focused, open & engaged, transforming and safeguarding) aim to present a renewal and repositioning to ensure that the CBI's direction and ambitions over the next five years are responsive and forward looking.

Gabriel Makhlouf, Governor and Chair of the Central Bank Commission, noted that the CBI is at a "watershed moment", due to its expanding mandate and the increasing speed of change in financial systems. In response, CBI key aims will include:

  • Supporting innovation in central banking and financial services
  • Strengthening the resilience of the financial system to climate-related risks and its ability to support the transition to a low-carbon economy
  • Reviewing and developing the macro-prudential framework for banks, borrowers and non-banks
  • Accelerating the evolution of the CBI's risk-based supervisory approach, such that it becomes more data-driven, agile and scalable
  • Enhancing the regulatory framework and the CBI's supervisory execution, prioritising: 
    • the interests of consumers
    • governance, accountability, behaviours and conduct in firms  (SEAR will form a key element) 
    • financial and operational resilience in firms
    • anti-money laundering/countering the financing of terrorism compliance
  • Continuing to strengthen the CBI's crisis management capabilities 

       Governor Makhlouf also delivered a speech to the ESRI where he discussed the forward-looking priorities for the macro-prudential framework in Ireland. As previously signalled, the CBI           will conduct a review in the next 12 months across three pillars of the macro-prudential framework: borrowers, banks and non-banks. 

       In the context of non- banks, priorities include the following:

  • Deepening policymakers’ understanding of the potential implications of a disruption in market based finance (and, in particular, Irish domiciled investment funds) on economic activity, with particular focus on the Commercial Real Estate (CRE) market. The lack of a complete and operational macro-prudential toolkit is seen as a key gap.  In that respect, European and international regulatory bodies have recently signalled the need to develop these tools for the sector, to increase their resilience and thus mitigate the need for future central bank interventions in a crisis.
  • Noting the potential sensitivity of the Irish CRE market to global shocks, the CBI will, in the coming weeks, open a consultation on potential measures to limit leverage and liquidity mismatches in the property fund sector. These have a macro-prudential objective. 

For more information please contact Anne O'Neill, senior knowledge executive, Nollaig Greene, Knowledge lawyer or any member of the Asset Management & Investment Funds team.

Date published: 10 November 2021