The Central Bank has sought submissions from the public on its regulatory framework after governor Gabriel Makhlouf warned many of the boundaries around which financial policy has been built are becoming “increasingly blurry”.
Makhlouf was speaking at the 10th annual Macroprudential Conference, organised jointly with the Deutsche Bundesbank, the Nederlandsche Bank, and the Sveriges Riksbank.
“Households and businesses rely on the financial system to make payments, safeguard savings, manage risks, and finance investment,” he said.
“When it fails, the consequences extend far beyond financial markets and financial institutions, affecting communities across society, and often falling most heavily on those least able to bear them. Ireland’s experience leaves us in little doubt about those costs.”
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He said the Irish experience shows “the value of building resilience before it is needed” but added current policies “cannot prevent every shock”, but “neither should they seek to prevent all risk-taking”.
“The financial system is changing quickly, and our frameworks must continue to evolve with it,” he said. “Risks move between banks and non-banks, across markets and jurisdictions, and between the traditional financial system and new forms of digital finance.
“Cross-border payments remind us that the infrastructure through which finance operates is itself a source of both opportunity and risk.”
Makhlouf said frameworks built for one structure of finance may become less effective as activity migrates elsewhere.
“Measures intended to strengthen one part of the system may shift risk into another,” he said. “And new technologies can change behaviour more quickly than our data, models or rules can adapt.
“The answer is not to pursue a financial system without change or without risk. Innovation, risk-taking and the movement of capital are essential to a productive economy. The task is to ensure that the financial system can adapt and innovate while remaining resilient.”
In response, the Central Bank has launched a public consultation seeking views on its approach to its regulatory impact assessment and on its approach to consultation with stakeholders.
The consultation forms part of the Central Bank’s work to deliver a more effective and efficient regulatory framework, building on its recent new supervisory approach and roadmap of regulatory initiatives.
The Central Bank said it is interested in hearing from stakeholders across the financial system, including industry, civil society and consumer representatives, the public, policymakers and peer institutions.
Submissions can be made through a dedicated online submission form, by email, or in writing. The Central Bank will consider all submissions received and will publish a feedback statement. The deadline for submissions is September 30th.
