Gabriel Makhlouf: Opening remarks - Financial Industry Forum
Opening remarks by Mr Gabriel Makhlouf, Governor of the Central Bank of Ireland, at
the Financial Industry Forum, Dublin, 21 April 2023.
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Good morning everyone,
Welcome back to the Central Bank for our third meeting of the Financial Industry Forum.
We have a good agenda ahead of us and I look forward to hearing from you all.
As I've said before, engaging with you - our key industry stakeholders - is of critical
importance to our work, and engagement with our stakeholders from across the
community is at the heart of our strategy. The objective is a better understanding of the
issues we all face.
As part of today's meeting, we will discuss the key themes emerging from the Forum's
subgroups.
Last October, you asked to nominate alternates to attend the Subgroups which resulted
in 63 representatives from 14 bodies attending meetings. It's provided us with
considerable scope, diversity of perspective and experience, and will contribute greatly
to a strong and meaningful platform for shared, strategic dialogue.
The current macroeconomic conjecture
Some of us have just returned from attending the Spring Meetings of the World Bank
and International Monetary Fund's (IMF) spring meetings in Washington DC.
So you might find it useful if I gave you a quick overview of some of the issues that
arose there.
Mark Cassidy, our Director of Financial Stability, will give a more detailed presentation
shortly.
The discussions in Washington were dominated by the complex challenges facing the
global economy including:
economic and macro-financial implications of geopolitical fragmentation;
heightened financial stability risks in the wake of recent market turbulence with
focus on both banks and non-banks;
policy making in a high interest rate environment;
and how to tackle soaring public debt.
As you are all aware, the financial system is being challenged by the stresses that are
being brought upon it by necessary monetary policy tightening.
Since the events in the United States in early March, we have been focused on
potential financial stability implications, the possible indirect effects and channels of
contagion.
Risks in the non-bank sector may arise especially from liquidity mismatch and leverage,
which could adversely affect market conditions should risks materialise.
The IMF's sluggish outlook for the global economy reflects the tight policy stances
needed to bring down inflation, the fallout from the recent deterioration in financial
conditions, Russia's war in Ukraine and growing economic fragmentation.
Other downside risks we discussed at the meetings were a severe tightening of global
financial conditions, sharper monetary policy impact amid high debt, stickier inflation,
systematic sovereign debt distress in emerging markets and developing countries,
China's growth and the fragmentation that is hampering multilateral cooperation.
The increased uncertainty faced by the global economy is reflected in the ongoing high
uncertainty around the outlook for the euro area. The Governing Council of the ECB will
be especially focused on incoming data as part of making our monetary policy
decisionmaking in the coming weeks.
Our recent decisions represent a significant tightening of the monetary policy stance,
commensurate to the significant challenges to price stability we have been facing. And
on the evidence so far, it is too early to start planning for a pause in our tightening of
policy. Indeed, and again based on the evidence we have to-date, rates will need to
continue at restrictive levels to help re-set the balance between supply and demand in
the economy and bring down inflation.
Supervisory milestones ahead in 2023
Deputy Governor's Sharon Donnery and Derville Rowland have recently spoken about
our supervisory milestones for 2023.
This year our principal focus will be on:
the assessment and management of risks to financial and operational resilience;
continuing to drive for fair outcomes for consumer and investors;
overseeing the withdrawal of Ulster Bank and KBC from the Irish market; and
detecting and sanctioning market abuse.
Transforming our approach to regulation and supervision
A key priority in Our Strategy is to transform how we regulate and supervise the
financial services sector.
Our objective is more efficient and effective regulation and supervision, better enabled
by data and technology, and supported by new skills and enhanced capabilities.
We will retain our risk-based approach to supervision but operate in a more integrated
manner across our expanding mandates.
We are currently in the early design phase of this, but it is something we would like to
discuss with you in the future.
We are aiming to put innovation at the centre of our approach to regulation and
supervision, both in how we enhance our own operational capabilities and also in how
we harness the benefits and mitigate the risks arising from innovation within firms and
the financial sector as a whole.
On the enhancement of our Innovation Hub, I understand there was a good discussion,
with useful insights, at the Innovation Sub-Group about actions that we can consider as
part of this work.
We will engage with you and the wider sector in greater detail as we work through this
programme of transformation, as well as our broader Strategy.
I'll now handover to Mark Cassidy to talk to you about the current economic and risk
environment before we move to discussion. We want to hear from you about the
challenges that you and your members are experiencing in managing your firms and
safeguarding consumers and investors at this time.
Thank you.