The Irish Financial Services sector: a Prudential Regulation Perspective - Speech by Deputy Governor Ed Sibley

• In first major speech since appointment, outlined his priorities for prudential regulation of the financial services sector;
• Noted that, across all sectors, more work needed to be done to meet supervisory expectations;

• Called on firms to do more to prepare for a ‘hard’ Brexit.

Addressing the Financial Centres Summit, in his first major speech since appointment, Deputy Governor, Prudential Regulation, Ed Sibley, presented his priorities for prudential regulation of the financial services sector in Ireland.

Deputy Governor Sibley highlighted the interlinkages between financial conduct, including consumer protection, and prudential regulation.  He outlined his focus on the delivery of effective, intrusive, analytical and outcomes-focused supervision, with the aim of ensuring that the “Irish financial sector serves the needs of the economy and its customers over the long term”. He went on to say that across all sectors, it is obvious that there is still much work needed to meet supervisory expectations, with business model vulnerabilities remaining, governance issues still prominent and strong evidence that the level of cultural change has been insufficient.

Deputy Governor Sibley emphasised that legacies from the crisis remain prominent across many sectors.  He cautioned against the regulatory pendulum “swinging back and undoing the work of the past decade.” The economic and social costs of ineffective regulation, he said, are well demonstrated and far outweigh the costs of regulation, and that we must not forget the lessons of the past. He also emphasised the importance of continued regulatory convergence across jurisdictions, particularly in the context of Brexit.

On Brexit, he noted that there are direct and material impacts on the existing financial services firms operating in Ireland, especially those who have direct exposure to the UK. He said “It is entirely plausible that there will be a ‘hard’ Brexit, with no transition period.  Much more work needs to be done to prepare for this plausible scenario, particularly in the insurance sector.” On the Central Bank’s own preparations, he said it has assigned its most senior and experienced supervisory and regulatory experts to work on Brexit, demonstrating its commitment to having the resources to both authorise and supervise new entrants or changes to existing firms.

He also covered a number of regulatory developments. He highlighted the importance of firms’ preparations for MiFID II, the completion of Capital Markets Union and noted that the Central Bank continues to examine closely the proposals for the future of the European Supervisory Authorities.