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Central Bank Sets Out Risk Outlook and Supervisory Priorities for 2024

The Central Bank has published its Risk Outlook and Supervisory Priorities (RSO) for 2024, outlining its expectations for the financial sector in the coming year. The RSO sets out six key supervisory priorities aimed at promoting proactive risk management and a consumer-centric approach by regulated entities.

Risk Outlook

The Central Bank’s risk outlook is divided into three broad themes:

  • Maconomic and Geopolitical Environment: inflation and interest rate risks, asset valuation and market risks, liquidity and leverage risks, credit and counterparty risks, as well as climate change and sustainability risks.
  • Regulated Entities’ Operations: way regulated entities operate and respond to today’s changing world.
  • Long-term Structural Forces: risks driven by longer-terms structural forces.

Supervisory Priorities

The Central Bank has identified six key supervisory priorities for 2024:

  • Conduct of Business

Regulated entities must prioritize the conduct of their business, ensuring that they are treating customers fairly and transparently.

  • Risk Management

Entities must have robust risk management frameworks in place to identify, assess, and mitigate risks.

  • Consumer Protection

The Central Bank will focus on protecting consumers by ensuring that regulated entities are providing them with clear and timely information about their products and services.

  • Sustainability

Regulated entities must consider the environmental, social, and governance (ESG) impacts of their activities and report transparently on their sustainability performance.

  • Operational Resilience

Entities must have robust operational resilience frameworks in place to ensure that they can continue to operate effectively in the event of disruptions or crises.

  • Cybersecurity

The Central Bank will prioritize cybersecurity, ensuring that regulated entities are taking adequate measures to protect themselves against cyber threats.

Sector-Specific Supervision

The Central Bank has also identified specific areas of focus for each sector:

  • Payment Institutions and Electronic Money Institutions: addressing deficiencies in safeguarding, governance, risk management, and control frameworks.
  • Retail Credit Firms and Credit Servicing Firms: engaging with borrowers in early arrears and resolving distressed debt.
  • Insurance and Reinsurance: integrating climate change and sustainability considerations into their business models.
  • Asset Management and Investment Funds: focusing on risk-based scrutiny of fund applications and new trading venues.
  • MIFID Investment Firms: conducting risk assessments on compliance, IT, and operational risk frameworks.

Spotlights

The RSO includes topic-specific sections, or “spotlights,” covering:

  • Consumer Protection
  • Artificial Intelligence
  • Financial Crime

These spotlights provide further guidance on the Central Bank’s expectations for regulated entities in these areas.

Conclusion

The Central Bank’s Risk Outlook and Supervisory Priorities (RSO) for 2024 set out a clear agenda for promoting proactive risk management and a consumer-centric approach by regulated entities. Regulated entities are advised to review the RSO carefully and take steps to ensure compliance with the Central Bank’s expectations.