In our January 2016 e-zine, we outlined the Central Bank’s Themed Inspections Programme for 2016. The inspections represent both supervisory priorities and anticipated areas of emerging risk. Two recent addresses1 by the Central Bank’s Director of Market Supervision (the Director) have further emphasised the importance of supervision in the funds industry and highlighted some current key areas of supervisory focus. These include:

Disclosure of investment fund fees

The Central Bank acknowledges that effective disclosure is at the heart of investor protection, with the prospectus and the KIID providing a clear framework for funds to make these disclosures. However it believes that more work needs to be done to assess whether the communication of this information results in investors efficiently discriminating between funds. Thus, one of the themed-inspections for this year will examine Total Expense Ratios. The aim of this inspection is: (a) to build up a data-driven approach to understanding Total Expense Ratios; and (b) to identify funds that are outliers, essentially identifying those funds that warrant follow-up supervisory engagement.

Stress-testing of investment funds

Speaking at a recent conference the Director noted that the issue of investment fund stress-testing is an emerging area of supervisory focus. This is due to an increasing supervisory focus on the ability of investment funds to meet redemption requests due to market volatility. He noted that run-risk stress testing is likely to appear on the supervisory agenda in the near future.


Cybersecurity is set to remain an area of supervisory priority for both the Central Bank and regulators internationally and boards of directors must prioritise it accordingly. It is important for all regulated financial services firms to firmly focus on managing and addressing cyber risk. It is now front-and-centre on the supervisory agenda for 2016 and firms must ensure they are able to demonstrate to the Central Bank that appropriate steps are being taken to deal with it. It is expected that the Central Bank will later this year publish an initial paper on cybersecurity risk outlining its thinking and supervisory experience on the issue and setting out its expectations for regulated firms.

Fund governance

There will be a continued focus on various issues around directors’ time commitments with the focus on directorships with a considerable number of sub-fund commitments. There will also be a focus on the risk culture within MiFID firms including governance arrangements, risk ownership and responsibility.

The underlying theme for many of the thematic reviews is to strengthen firms’ regulatory compliance culture. The Central Bank views culture as a key driver for behaviour and boards must take responsibility for setting the cultural tone within their firms. The use of supervisory tools to both assess culture and promote better behaviours is according to the Director: ‘why supervision (as opposed to rule-writing) is so important for the coming years’.