Financial Crime World

Future of Banking Regulation: Key Developments on the Horizon

As the banking landscape continues to evolve, regulatory bodies are working to address emerging issues and promote a more sustainable financial sector. In this article, we will outline key changes expected in legal and regulatory policy over the next few years.

The Central Bank of Ireland (CBI) is continuing to work with Irish banks to mitigate the impact of Brexit on their operations. Key concerns include:

  • Uncertainty around future trading relationships: The CBI is addressing this uncertainty by working closely with banks to ensure a smooth transition.
  • Mitigating risks and ensuring financial stability: The CBI is taking steps to mitigate potential risks and maintain financial stability in the wake of Brexit.

Sustainable Finance: A Growing Priority

The CBI expects banks to play a key role in financing the transition to a more sustainable economy. To achieve this goal:

  • Corporate Sustainability Reporting Directive (CSRD): The CSRD will be phased in for financial years starting on or after January 2024, requiring ESG reports to be audited and aligning reporting standards with mandatory EU sustainability reporting standards.
  • ESG reporting requirements: Banks will need to prioritize sustainable finance practices and report on their environmental, social, and governance (ESG) performance.

Technological Innovation: Managing Risk

The CBI is focused on technological innovation, including big data and algorithms, to assess the risks posed by the inappropriate use of technology and information asymmetries between firms and customers. This includes:

  • Risk assessment: The CBI will monitor and assess the risks associated with technological innovations in the banking sector.
  • Regulatory oversight: Regulatory bodies will provide clear guidelines on how to manage these risks and ensure that banks operate safely.

Individual Accountability

The CBI is advocating for legislative change to assign regulatory responsibility to individuals working in regulated entities. Key changes include:

  • Senior Executive Accountability Regime (SEAR): A new Individual Accountability Framework will be introduced, which includes SEAR, Conduct Standards, Fitness and Probity Regime, and Administrative Sanctions Procedure.
  • Fitness and probity regime: Firms will need to certify annually that individuals performing prescribed controlled functions within the firm are fit and proper to do so.

These changes aim to enhance regulatory requirements for banks in Ireland, particularly in areas such as sustainable finance, technological innovation, and individual accountability.