for central banks performing their risk management mandate. risk managers in the eurosystem now engage with supervisors who perform their mandate as part of ecb banking supervision. one potential challenge for national central banks may arise given risk management decisions relating to counterparties are taken independently. supervisors may at the same time be taking similar decisions but with different priorities. if those assessments differ, for example in the case of counterparty solvency for emergency liquidity assistance ( ela ), potential communication challenges will have to be overcome, given the new institutional structure. the central bank of ireland learned during the crisis about the difficulties with a separate approach to supervision and central banking. supervisory functions had been divested to the irish financial services regulatory authority ( ifsra ). however, they remained housed with the central bank, under the umbrella of the central bank and financial services authority of ireland ( cbfsai ). subsequent reviews of the performance of the structure in the lead up to, and during, the financial crisis identified inadequate channels of communication between the two entities as part of the underlying factors behind the development of the risks that manifested in the irish banking sector. 7 the central banking and supervisory entities have since re - merged into the central bank of ireland. to avoid such problems of the past, the central bank actively promotes a ‘ one bank ’ philosophy to foster communication and collaboration across the different functions. other important elements of banking union also have implications for risk management in central banks. resolvability assessments and resolution plans are key parts of the new regulatory framework of the bank recovery and resolution directive ( brrd ). furthermore, the single resolution board ( srb ) provides a similar overarching institutional structure with potential similar challenges as outlined earlier for the ssm. we must continually focus on the efficient and effective cooperation of respective functions across our new multi - layered institutional structure, not least for periods of stress. 3 / 4 bis central bankers'speeches conclusion to conclude, the effects of accommodative monetary policy and the legacy of the financial crisis still weigh on banks ’ balance sheets and the full effects and incentives of regulatory measures are perhaps not yet observable. for central banks, in particular, the achievement of our price stability mandate has necessitated the expansion of our balance sheets with the resulting change in our risk profile. risk managers must always ask themselves whether they are adequately prepared for sudden changes in current circumstances. risk managers must also look ahead in consideration of the impact of future longer - term developments and how they

sharon donnery : central bank risk management in a changing institutional and regulatory environment speech by ms sharon donnery, deputy governor ( central banking ) of the central bank of ireland, at the joint bank of portugal and european central bank conference on " risk management for central banks ", lisbon, 26 september 2017. * * * introduction robert f. kennedy once said “ like it or not we live in interesting times ”. 1 as central bankers, supervisors, or market participants alike, those working in financial markets have certainly come through some extraordinarily interesting times in recent years. for central banks, risk management is at the intersection of both central banking and supervisory structures, and the financial market. it is, therefore, a pleasure to speak to some of the issues which are emerging in this space, particularly in the context of the changing european institutional architecture and regulatory environment. during recent years, fragile, and indeed unstable, economic and market conditions have required central banks to assume potentially substantial financial risks. these were taken with the objective of maintaining the appropriate functioning of the monetary policy transmission mechanism and restoring price stability. this fundamental shift in the risk profile of central banks ’ response is an integral part to performing our role and to fulfilling our mandate of bringing inflation below but close to 2 per cent over the medium term. in parallel, following the financial crisis, regulatory reform has focussed on better safeguarding the stability and efficiency of an increasingly globalised financial system and, importantly, mitigating the impact of future market failures. these changes have brought a whole array of new regulatory policies. while most of the policy reforms are directed at commercial financial institutions, all financial market participants, including central banks are affected – not least by the important structural changes with the advent of banking union. for the purposes of today ’ s discussion, the focus of my remarks is on the implications for central bank risk management. the implications, however, differ, depending on which part of a central bank ’ s mandate one focusses. it is possible to discern different implications of the recent developments in regulatory frameworks for risk management policies and practices, depending on whether we focus on monetary policy, financial stability, supervision, reserves management, or payments and settlements. moreover, some of the implications of regulatory developments are not yet fully understood given many are still at an early stage of implementation. today, i would like to briefly discuss three aspects of recent developments in regulatory frameworks for risk management in central banks : 1. the impact of regulation on central