Central Bank of Ireland publishes Regulatory Outlook Report for 2026

On 26 February 2026, the Central Bank of Ireland (the Central Bank) published its annual Regulatory & Supervisory Outlook Report (the RSO).

As the Central Bank notes, it ispublished at a time of accelerating change in the global environment, with numerous aspects, such as geopolitical fragmentation, macro-financial uncertainty and rapid technological transformation, reshaping the financial system.

The Central Bank considers that, while these developments present opportunities, they can also expose vulnerabilities, meaning that firms and supervisors alike must remain vigilant, resilient and forward-looking.

What does the RSO contain?

In the RSO, the Central Bank

• describes the global macro environment, major trends and drivers of risk.

• outlines its assessment of the key risks facing regulated entities

• sets out its overarching supervisory priorities

• provides a sector-by-sector view, including its key areas of supervisory focus and planned activities.

The RSO also includes three articles, which offer more detail on the following topics

• a supervisory perspective on artificial intelligence.

• the importance of operational resilience in service provision

• the Central Bank's approach to consumer and investor protection.

Looking forward, the RSO notes that

• the Central Bank will continue to be outcomes-focused, risk-based and forward-looking so it remains effective in addressing the rapidly changing risk landscape

• it expects firms to maintain strong governance, risk management and operational resilience, and to act in the best interests of their customers.

Looking at the RSO's contents in more detail:

The Central Bank's risk theme drivers

Although Ireland's financial sector has demonstrated resilience through recent turbulence, Ireland's position as a highly interconnected financial centre means that risks can emerge and spread quickly.

As a result, firms must ensure that they are resilient, well-governed and capable of managing evolving risks, especially as the global environment remains uncertain and subject to heightened geopolitical and macro-financial risks.

Technological innovation and longer-term structural transitions, such as that to a more environmentally sustainable economy, are reshaping the financial landscape.

Against this backdrop, the Central Bank identifies the following three broad risk driver themes

• Risk theme A drivers: Macroeconomic and geopolitical environment.

• Risk theme B drivers: How regulated entities are responding to today's changing world

• Risk theme C drivers: Longer-term structural forces at play.

The Central Bank's supervisory priorities

In addition, the Central Bank sets five overarching supervisory priorities for 2026, which are intended to address the most material risks facing the financial system. These are

Priority 1: Maintaining and building resilience to geopolitical risks and macro-financial uncertainties - this includes work on operational resilience, cyber security and financial resilience and how firms are embedding climate and environmental factors into their risk management, business models and governance.

Priority 2: Securing consumer and investor interests in a rapidly changing world - this priority focuses, in particular, on how firms operate, digitalisation and financial crime, with rising risks to consumers from frauds and scams.

Priority 3: Responding to technology-driven transformations - this covers the implications of the expanding use of AI, digital money and tokenisation for firms and the financial system.

Priority 4: Helping to address the environmental and societal transitions underway - this includes work on protection gaps, retail investment participation, the evolving payments landscape and sustainable finance.

Priority 5: Enhancing how the Central Bank regulates and supervises.

The funds sector in Ireland

(a) The health of the Irish funds sector

Looking more specifically at the funds sector, the RSO notes that Ireland has 136 regulated fund management companies (FMCs) and 65 fund service providers (FSPs) including 41 fund administrators and 24 depositaries.

Furthermore, as at September 2025

• There were approximately 9,100 Irish authorised funds, with a NAV of almost €5.3tn, up 6% on end 2024

• Ireland hosted two-thirds of the total assets of the ETF sector in the Euro area with a total NAV of over €1.9tn

• ESG funds represented 32% by number of funds (2,878) and 39% by net asset value (NAV) (€2.07tn) of all Irish funds.

(b) Key takeaways for the Irish Funds sector

The RSO provides the Central Bank's four 'Key takeaways' and seven Supervisory Activities for 2026.

These are

• The sector faces a sustained period of transformation across many aspects - geopolitical fragmentation, evolving regulation, business model adaptations, increases in complex product offerings and digital transformation.

• Simplification and the EU's Savings and Investment Union (SIU) initiative will be central to improving EU competitiveness.

• The sector's size and increasing complexity present a broad range of risks to the Central Bank's safeguarding outcomes and these require ongoing and robust supervision of risks such as liquidity, leverage, with an enhanced focus on private (complex) assets, anti-money laundering practices, the impact of digitalisation and asset valuation.

• The effectiveness of governance, risk management and operational resilience frameworks across the sector will remain a priority for the Central Bank in and beyond 2026.

(c) The Central Bank's Supervisory Activities

The Central Bank's supervisory activities across the funds sector will be undertaken at

• firm level for those subject to close and continuous supervision and

• sectoral level for others supplemented by firm specific work as appropriate.

The RSO sets out seven focus areas on which it intends to focus (looking particularly at the effectiveness of governance) - these include

• delegation and outsourcing frameworks

• oversight and control of cyber and operational resilience

• liquidity and leverage risk

• asset valuation and

• market risk management.

For each, the Central Bank sets out its planned activities, the intended outcome of which is to ensure the integrity of the market with well-governed and resilient firms, effective safeguarding of client assets, securing investors' interests, transparent disclosure and high standards of compliance with applicable rules.

1. Governance and risk management

Planned activities in this area include

• Continuing the sectoral assessment of delegation in FMCs - the first industry communication from the review is expected in H1.

• Concluding its review of the effectiveness of fund administration and depositary management of outsourcing.

• Reviewing the effectiveness of governance and boards in fund administrators and depositories.

• Reviewing compliance functions across fund administrators and depositaries - the Central Bank's engagement on this will start in H1

• ESMA common supervisory action - the subject of the CSA will be confirmed by ESMA in due course.

• Supporting the transition to AIFMD II for funds and fund service providers

2. Operational and cyber resilience

Planned activities in this area include

• There will be a focus on how FMCs and FSPs implement and monitor the requirements of DORA - the Central Bank will issue a survey in H1 2026.

• The Central Bank's risk-based approach to AML/CFT/FS will continue into 2026 and will include supervisory data requests such as the enhanced Risk Evaluation Questionnaire (REQ) This will capture detailed information on ML/TF risk and the quality of AML/CFT controls and the data will help identify firm and sector-specific issues, guide supervisory strategy and meet data requirements for the EU's incoming Anti-Money Laundering Authority.

• Through 2026, there will be a thematic inspection and engagement with firms across the sector, focusing on transaction monitoring and STR reporting.

• The Central Bank will engage with affected depositaries as to how they are executing their CRD6 compliance plans

3. Asset valuation and market risks

Planned activities in this area include

• The Central Bank intends to pursue responsive supervision of proposed and implemented changes in firms operating processes and arrangements, focussing on their capacity to respond effectively to stresses in market conditions.

• It will conduct an examination of the appropriateness of industry approaches / processes for monitoring investment restrictions and reporting regulatory breaches.

• It will undertake a review of VaR, focussed on UCITS that use this approach and the effectiveness of depositary oversight.

• There will be a continued enhancement and use of fund data and risk models by the Central Bank to deliver a data-led, agile and risk-based approach to the effective and efficient oversight of funds.

• The Central Bank will review the valuation oversight, focussing on hard to value assets and the depositary's oversight function.

4. Liquidity and leverage risks

Planned activities in this area include

• The Central Bank will continue to focus on liquidity risk management - this will include a thematic review on cohorts which the Central Bank's fund risk model identifies as engaging in significant liquidity transformation.

• A review of liquidity risk management in bond funds, assessing how firms manage the mismatch between investor redemptions and asset liquidity

• A review of the progress relevant AIFMs are making on leverage reduction and maintenance plans across property funds

• A property funds questionnaire (Q1) and follow up engagement through H2 2026.

5. Product costs and disclosures

Planned activities in this area include

• The Central Bank will continue to engage with industry in relation to establishing funds that give exposure to instruments previously considered to present higher risk.

• It will continue to engage domestically with regulated firms in the funds sector (as well as with ESMA) on costs and fees with a focus on value for money.

• Gatekeeping - this is seen by the Central Bank as a vital tool for assessing fund disclosures, levels of costs and transparency for prospective investors.

• Consistent application of the principles of the Consumer Protection Code and assessing how firms are implementing it

6. Data and artificial intelligence

The deployment of AI across the funds sector brings its own set of risks when awareness, governance and controls are inadequate. With firms' increasing reliance on sophisticated quantitative models for stress testing, scenario analysis and statistical assessments comes a greater potential for errors in model design, calibration or implementation, which could increase the chance of unintended market impacts or manipulative practices.

Rigorous model governance - including thorough validation, ongoing performance monitoring and strong documentation - is essential to mitigate these risks across the funds sector.

Planned activities in this area include

• The Central Bank will continue to enhance its use of fund data and risk models in order to deliver a data-led and risk-based approach to the effective and efficient oversight of the funds sector.

• It will also continue to engagement with firms to understand their approach to, and use of, AI in their business models.

7. Climate and ESG-related risks

The Central Bank's industry report of October 2025 outlined its findings and expectations arising out of ESMA's CSA on sustainability and disclosure risk, highlighting areas for improvement - these include inconsistent sustainability risk monitoring, data quality challenges and unclear product disclosures.

Planned activities in this area include

• The Central Bank will continue its sustainability work, using its ESG dashboard tool to assess firms' compliance with the SFDR.

• It will continue to monitor compliance with the Fund Naming Guidelines at both the gate and through data-led supervisory reviews.