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Supervisory priorities and assessment of risks and vulnerabilities

Our supervisory priorities set out the focus areas of our activities for the years ahead. They are defined annually but can be reviewed at any time if this is justified by risk developments.

We develop our supervisory priorities based on what we consider to be the key risks and vulnerabilities supervised institutions face in the current economic, regulatory and supervisory environment.

Supervisory priorities for 2022-2024

What are the supervisory priorities?

Priority 1

Ensuring that banks emerge from the pandemic healthy

Addressing the impact of the pandemic and ensuring that the banking sector stays resilient is a crucial objective for us.

Impact of the pandemic

Key vulnerabilities

Deficiencies in credit risk management frameworks

Banks should address deficiencies in their credit risk management frameworks to boost their resilience to potential asset quality deterioration.

Credit risk management
Exposures to vulnerable sectors

Some sectors were hit harder by the pandemic than others. Banks’ exposures to these sectors need to be adequately monitored and managed.

Vulnerable sectors
Exposures to leveraged finance

The search for yield contributed to a further build-up of risks in leveraged loan markets. Supervisors will step up their efforts to ensure banks adequately manage risks in these segments.

Leveraged finance
Sensitivities to shocks in interest rates and credit spreads

Banks need to be prepared to cope with a potential repricing of financial markets. This includes medium-term interest rate and credit spread shocks.

Interest rate and credit spread shocks

Priority 2

Ensuring that banks address structural weaknesses

Banks should address persisting deficiencies in their digital transformation strategies and governance. This should help make their business models more resilient and sustainable.

Structural weaknesses

Key vulnerabilities

Deficiencies in banks’ digital transformation strategies

The digitalisation of banking has picked up pace. As supervisors we will focus on making sure that banks have sound strategies and adequate arrangements in place.

Digital transformation strategies
Deficiencies in management bodies’ steering capabilities

Banks need to strengthen the effectiveness of their boards and their strategic steering capabilities to address the risks and challenges stemming from the constantly evolving environment in which they operate.

Management bodies’ steering capabilities

Priority 3

Ensuring that banks tackle emerging risks

Banks face a number of emerging challenges. We will focus on vulnerabilities related to three themes: climate-related and environmental risk, counterparty credit risk and IT resilience.

Emerging risks

Key vulnerabilities

Exposure to climate-related and environmental risks

Addressing risks stemming from climate change and environmental degradation will be one of the main challenges for banks and supervisors in the years to come.

Climate-related and environmental risks
Exposures to counterparty credit risk

Banks should have sound governance and risk management frameworks in place to adequately address risks stemming from increased exposures to more risky and less transparent counterparties.

Counterparty credit risk
Deficiencies in IT outsourcing and cyber resilience

The fast pace of digitalisation makes it essential to strengthen banks’ resilience against cyber threats and to ensure IT outsourcing is adequately managed.

IT outsourcing and cyber resilience

How do we use the supervisory priorities and the risk assessment?

Besides defining the key areas of focus for supervisors in the years ahead, the supervisory priorities and the risk assessment provide important input for the Supervisory Review and Evaluation Process.

Supervisory Review and Evaluation Process (SREP)
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