On 26 February 2026, the Central Bank of Ireland (CBI) published the third edition of its Regulatory & Supervisory Outlook Report 2026 (RSO), setting out its assessment of risks across the financial system and its supervisory activities for the year ahead. The RSO builds on the CBI Governor’s January letter to the Minister for Finance.
The CBI notes that governance, risk management and operational resilience will remain priority areas in 2026. Supervisory activities will be undertaken at firm level for entities subject to close and continuous supervision, and at sector level, supplemented by firm specific engagement where appropriate. The RSO sets out seven supervisory focus areas for the Irish funds sector, which are:
- Governance and risk management
- Operational and cyber resilience
- Asset valuation and market risks
- Liquidity and leverage risks
- Product costs and disclosures
- Data and AI
- Climate and ESG risk
For an overview of these focus areas please see below.
The CBI highlights a fast-evolving Irish funds environment shaped by geopolitical fragmentation, regulatory change, business model adaptation, growing product complexity and accelerating digitalisation. The CBI identifies simplification and the EU’s Savings and Investments Union as remaining central to supporting EU competitiveness and investor outcomes, with the Irish funds industry expected to play a pivotal role.
Across the wider financial system, the CBI notes that operational risks remain at a very elevated level, alongside increased asset valuation and market risks and rising data, model and AI related risks. For an overview of the CBI’s industry wide and sector specific priorities, including MiFID supervisory activities, please refer to our Financial Regulation advisory here.
Focus area 1: Governance and risk management
The CBI highlights governance and risk management as continued supervisory priorities. It notes that risks may arise where local boards or executive committees have insufficient substance or decision-making capacity, or reduced ability to set and oversee their own risk appetite, or where there are weaknesses in risk monitoring, compliance functions and implementation of the three lines of defence model. These risks are particularly relevant in the context of delegation and outsourcing.
Key CBI activities
- Review of delegation in fund management companies (FMCs) (initial communication in H1 2026)
- Review of outsourcing effectiveness by fund administrators and depositaries (H1-H2 2026)
- Review of governance and board effectiveness in fund administrators and depositaries (H2 2026-H2 2027)
- Review of compliance functions across fund administrators and depositaries (H1 2026)
- ESMA Common Supervisory Action (subject to be confirmed) (H1 2026-H2 2027)
- Support for AIFMD II transition (H1 2026-H2 2027)
Focus area 2: Operational and cyber resilience
The CBI highlights that weak cyber risk frameworks and insufficient operational resilience structures increase the risk of service disruption and attacks on firms and their third-party digital providers. High levels of delegation and outsourcing may dilute local control over risk management, business continuity, AI‑related processes and cyber security. Robust due diligence, governance and ongoing oversight are highlighted as essential to manage concentration, dependency and conduct risks. Financial crime remains an ongoing risk across the sector.
Key CBI activities
- DORA implementation, including threat‑led penetration testing (survey issued H1) (H1-H2 2026)
- Enhanced AML/CFT Risk Evaluation Questionnaire (H1-H2 2026)
- Thematic inspection of transaction monitoring and STR reporting (H2 2026-H2 2027)
- Engagement on CRD6 restructuring plans for depositaries (H2 2026-H2 2027)
Focus area 3: Asset valuation and market risks
The CBI will continue to focus on valuation governance and financial resilience. A thematic review on hard-to-value assets will examine policies, models and controls for level 3 assets (including real estate, private equity, private credit and other illiquid securities) across selected funds, managers and depositaries. This will be supported by ongoing risk-based engagement relevant to specific cohorts of funds and responsive supervision related to NAV calculation errors.
Key CBI activities
- Responsive supervision of operating processes and arrangements changes (H1 2026-H2 2027)
- Review of investment restriction monitoring and reporting of regulatory breaches (H2 2026-H2 2027)
- UCITS Value at Risk (VaR) model review and depositary oversight (H1-H2 2026)
- Enhancement of the CBI’s fund data and risk models (H1 2026- 2027)
- Valuation oversight review focused on hard to value assets and depositary oversight (H1-H2 2026)
Focus area 4: Liquidity and leverage risks
The RSO notes ongoing vulnerabilities in funds with higher leverage or significant liquidity transformation. The CBI emphasises the need for proportionate and robust documented leverage and liquidity risk management frameworks. Supervisory work will focus on liquidity risk management, including communication on the CBI’s work on LMTs and a thematic review on cohorts identified by its fund risk model as engaging in significant liquidity transformation. Leverage related systemic risks will be assessed through targeted reviews.
Key CBI activities
- Liquidity risk management review in bond funds (H1 2026-H2 2027)
- Progress assessment on leverage reduction and maintenance plans across property funds (H1 2026-H2 2027)
- Property funds questionnaire issued in Q1 2026, with assessment and follow up engagement through H2 2026 (H1 2026-H2 2027)
Focus area 5: Product costs and disclosures
The RSO highlights the importance of product governance, costs and fees, and transparency, particularly as product complexity and innovation accelerate. The CBI notes increased engagement on complex and innovative investment strategies and alternative assets, including crypto-assets, private debt, novel exchange traded fund (ETF) constructions, and tokenised structures.
Key CBI activities
- Engagement with firms and with ESMA on costs and fees and value for money, with follow up where issues arise (H1 2026-H2 2027)
- Gatekeeping assessments of costs, disclosures and transparency (H1 2026-H2 2027)
- Assessment of implementation of Consumer Protection Code (H1 2026-H2 2027)
Focus area 6: Data and AI
The RSO highlights that data quality, accuracy and reliability are essential for effective governance, decision making and supervision. It notes that increased reliance on AI and complex quantitative models increases the need for robust governance and control frameworks to manage the associated risks.
Key CBI activities
- Enhancement and use by CBI of fund data and risk models (2026-2027)
- Continued engagement on firms’ approach to AI and model governance (H1 2026-H2 2027)
Focus area 7: Climate and ESG risk
The RSO emphasises continued supervisory focus on climate and ESG risk, including greenwashing and integration of sustainability risks, both at authorisation and through ongoing supervisory engagement.
Key CBI activities
- Continued use of CBI’s ESG dashboard tool to assess SFDR compliance (H1 202 -H2 2027)
- Compliance with Fund Naming Guidelines at both the gate and through data-led supervisory reviews (H1-H2 2026)
Other focus areas
Appendix A outlines key EU and domestic regulatory initiatives relevant to the funds sector, including the EU Retail Investment Strategy, SFDR amendments, tokenisation within the financial markets ecosystem (with a CBI discussion paper expected in March 2026), AIFMD II transposition (alongside updates to the UCITS Regulations and AIF Rulebook), the EU Markets Integration and Supervision Package (MISP) and the UCITS Eligible Assets Directive (EAD) Review.
The RSO also features three spotlight articles on AI, operational resilience (DORA) and consumer and investor protection.
