The Central Bank of Ireland has warned of heightened operational, asset valuation, and market risks facing the financial sector, citing geopolitical tensions, rapid digitalization, and the increasing complexity of operating models. The assessment, published in the Regulatory & Supervisory Outlook Report on February 26, 2026, marks the third year of the report’s publication and provides a detailed view of the concerns held by Governor Gabriel Makhlouf and his team.
According to the Central Bank, operational risks remain “very high” due to the current geopolitical climate and the accelerating pace of technological change. Asset valuation and market risks have also increased relative to the previous year, alongside growing concerns related to data, models, and artificial intelligence. Makhlouf stated, “Risks once thought remote are now becoming more likely. The question is no longer whether change will come, but the nature, degree and speed of that change and how we respond collectively.”
The report signals a shift in the Central Bank’s focus, as inflation, a key concern in 2024 and 2025, is no longer considered a primary risk. This comes after a period of significant monetary policy tightening aimed at curbing price increases.
The Central Bank is also paying close attention to the development and deployment of AI technologies. The report highlights the potential for AI to amplify consumer protection risks and the challenges posed by varying levels of understanding and adoption of the technology. Specifically, the use of “agentic AI” – systems capable of autonomously executing transactions – is noted, with a particular focus on its application in the cryptocurrency space. The bank emphasized the need for “robust methods to assess AI-related conduct risks” and to evaluate the effectiveness of safeguards, acknowledging that regulatory capabilities are currently lagging behind the rapid advancements in the technology industry.
The Central Bank’s assessment comes as part of a broader effort to streamline financial regulation in Ireland. Governor Makhlouf, in a speech on November 25, 2025, outlined plans to simplify rules related to governance, outsourcing, anti-money laundering (AML), and data management. The bank intends to align Irish regulations with EU law, ensure consistency across domestic regimes, and apply requirements proportionally. This simplification agenda was further detailed in a report published on December 10, 2025, titled “Regulating & Supervising Well – A More Effective and Efficient Framework.”
The regulatory overhaul will include overhauling gatekeeping processes, supervision, and regulatory reporting. The Central Bank will also implement a new Regulatory Impact Assessment supervision model, replacing the existing PRISM framework. Karen O’Leary was appointed as the new Director of Enforcement on November 28, 2025, signaling a commitment to strengthening enforcement capabilities.
The Central Bank’s priorities for 2026 were also outlined in a letter from Governor Makhlouf to Tánaiste Simon Harris, detailing his views on Ireland’s macro-financial environment and the financial services industry.
