On 28 February 2025, the Central Bank of Ireland (Central Bank) introduced its new supervisory approach which seeks to integrate conduct, integrity and prudential supervision.

The Central Bank references the evolution of its supervisory approach since it introduced risk-based supervision (PRISM) in 2011.  The pace of change in the financial sector together with the additional responsibilities to supervise a changed landscape have prompted the development of this New Supervisory Approach.  The Central Bank remains committed to outcome-focused and risk-based supervision however, it will alter the way in which supervision is discharged.  Moreover, traditional regulatory distinctions such as ‘prudential’, ‘conduct’ and ‘anti-money laundering’ supervision will give way to integrated supervision, with multi-disciplinary teams working together to deliver the Central Bank’s supervisory priorities in a more effective way.

The Central Bank’s four safeguarding outcomes are

• protection of consumer and investor interests
• the integrity of the financial system
• the safety and soundness of firms
• financial stability

As PRISM is retired, what will the New Supervisory Approach look like?

Five Supervisory Principles will frame the delivery of safeguarding outcomes

• Outcomes Focused
• Risk-Based
• Judgement Led
• Forward Looking
• Firms’ Responsibilities

Sectoral Supervision will focus on three overarching industry categories of related products and services via multi-year supervisory strategies:

• Banking and Payments
• Insurance
• Capital Markets and Funds

Risk Mitigation and Remediation: as part of multi-year supervisory strategies there will be appropriate, holistic escalation of supervisory actions, and consideration of proportionality, to deliver effective remediation.  A targeted and proportionate approach to the use of enforcement powers will be taken.

Significant Firm Supervision will only apply to entities that could have a significant impact on the achievement of the Central Bank’s safeguarding outcomes.

Key take aways for regulated firms

PRISM is no longer the Central Bank’s framework for the supervision of regulated entities.

Under the New Supervisory Approach:

• Only the most significant regulated entities will receive close and continuous supervision with a dedicated supervision team (those likely to have been High Impact under the PRISM model).
• Less significant entities will be subject to increasing sectoral and cross-sectoral thematic engagements as part of an integrated supervisory approach with multi-disciplinary teams working together to deliver the Central Bank’s supervisory priorities.  Medium High and below rated PRISM entities will no longer have direct supervision.

Supervisory priorities for each sector will continue to be signposted in the Central Bank’s annual Regulatory and Supervisory Outlook Report.  These priorities will be aligned to multi- year sectoral supervisory plans which also incorporate European and other supervisory obligations.

The Central Banks new Organisational Structures, announced in January 2025, in particular the newly-established Horizontal Supervision Division, have been designed to discharge this New Supervisory Approach.

Comment

The Central Bank’s New Supervisory Approach will have an immediate and long-lasting impact for Irish regulated entities and is a significant step-change in the Central Bank Supervisory Framework.  Regulated entities and the Central Bank will need time to implement these changes in the months ahead.

The Central Bank’s 2025 Regulatory & Supervisory Outlook Report was also published on 28 February 2025.  Each of our Finance, Asset Management and Investment Funds, and Insurance groups will publish their sector-specific insights on the Report shortly.