Welcome to the FIG Top 5 at 5

On 7 May 2026, Deputy Governor for Financial Regulation at the Central Bank of Ireland (“Central Bank”), Mary-Elizabeth McMunn, delivered a speech (“Speech”) at a Banking and Payments Federation of Ireland event, focused on what she referred to as the “3 Cs”, being, capital, competition and complexity.

The Deputy Governor set the scene by briefly discussing the current risk environment, highlighting the way that rapid change is reshaping economies, the financial system and the risk landscape and in that regard she referenced the Central Bank’s February 2026 Regulatory and Supervisory Outlook (“RSO”) – for more information, see FIG Top 5 at 5 dated 5 March 2026. Noting the previously demonstrated resilience of the banking sector, she emphasised that a continued response is required, characterised by financial and operational resilience, adaptability and trustworthiness.

Capital requirements in the banking sector

 

The Deputy Governor highlighted the crucial role of capital in terms of the resilience of the financial sector and the ability of banks to withstand shocks, emphasising the importance of robust capital positions when it comes to the safety and soundness of banks and the wider system.

Ms McMunn expressed her view that keeping the banking sector strong and resilient means that banks can continue to preform their important functions in good and bad times.

When setting capital, the Deputy Governor stated that an approach that is risk based and forward looking should be taken. She also stated that a coherent approach must be taken in that “capital setting must be cognisant of the whole”. The also highlighted that capital should be built up during good times.

In that regard, some further key points made by the Deputy Governor are as follows:

• capital requirements can go up and down depending on the risk profile of an institution and the risks in the system as a whole;
• capital requirements will be based on a realistic and robust assessment of the future; and
• capital should be used and requirements lowered in bad times to preserve bank lending during those times.

The Deputy Governor then moved on to look at some statistics from the 2020s so far, illustrating the capital requirements in action, highlighting that:

• Ireland and the EU’s banking sector has shown real resilience in the face of the global shocks and financial volatility;
• the capital requirements during the 2020s shows a framework that is broadly working as intended and aligned with good capital setting; and
• strength built in good times, and relied on at times of stress, has been a huge asset for the sector, the financial system and the economy.

Lowering capital requirements

 

Ms McMunn discussed the fact that there are calls for a lowering of capital requirements and while she acknowledged that regulations and requirements should be regularly reviewed, she stated that, “an explicit focus on reducing levels of capital in itself to be honest sounds much more like de-regulation.”

In considering this matter further, the Deputy Governor again used relevant data, highlighting that:

• credit growth has recovered significantly in the last few years, countering the argument that lowering capital requirements would boost credit to the real economy. Indeed, the Deputy Governor stated that relevant economic literature suggests that the level of capital requirements has little effect on bank lending, and that well-capitalised banks typically lend more to the real economy;
• addressing the argument that a lowering is needed for profitability, she pointed to the fact that return on equity of euro area banks is at its highest since the introduction of the post crisis reforms, now standing above 10% in both Ireland and the EU; and
• she also stated that many proponents of lowering capital requirements cite international competitiveness, however, Ms McMunn stated that it is difficult to compare like for like as regards the EU, the UK and the US. She made the point that it is the competitiveness of our economies and the productivity of the US that we should be focused on, pointing to the deep and liquid capital markets of the US, highlighting the importance of the savings and investment union.

Competition

 

Deputy Governor McMunn highlighted the importance of a competitive retail banking sector for the Irish economy, noting the exit of two full service retail banks over the last few years and the resulting concern as regards competition. Some of the matters addressed by Ms McMunn are as follows:

• the Central Bank’s engagement with the Government’s retail banking review;
• the Central Bank’s analysis of the state of the Irish loan market using granular loan-level data from the Central Credit Register, published on 7 May 2026, highlighting that “the findings paint a much more diverse landscape than analysis relying exclusively on data related to domestic retail banks – and rather evidences a loan market characterised by a diverse ecosystem in which alternative lender types both contribute to market depth and provide alternative funding options for both SMEs and households.”;
• an increasing number of digital banks, payments firms and e-money institutions are adding to competition in the areas of payments and deposits;
• there has been significant growth as regards the scale of the banking sector– with total assets of Irish authorised credit institutions now above €770 billion, up 70% since 2016;
• the first new authorisation of a retail bank in some time took place in 2025, with the Deputy Governor stating that the Central Bank’s authorisation pipeline indicates that the financial sector is growing and that this trend looks set to continue;
• the addition of a competitiveness mandate to the Central Bank’s existing mandate is not desirable, with Ms McMunn stating that, “A competitiveness objective risks blurring our mandate at best, and at worst risks having a corrosive effect on decision-making leading to financial stability issues – precisely what happened the last time, not so long ago, we had a secondary mandate to promote the sector.”; and
• the Central Bank can contribute to the competitiveness of the economy by fulfilling its current mandate and by delivering robust, clear and predictable regulation.

Complexity

 

Here, the Deputy Governor focused on two aspects related to complexity.

First, she discussed the increasing complexity of the sector and its risk landscape, highlighting the importance of operational and cyber resilience, stating that “firms need a future-proofed strategic response with senior sponsorship and appropriate levels of investment.” In that regard, she advised that firms:

• maintain a clear view of their ICT risks, emphasising that existing known gaps need particularly urgent remediation;
• ensure ICT controls evolve with emerging threats, highlighting threats posed by increasingly sophisticated cyber risks and emerging technologies such as frontier AI; and
• be prepared to respond and recover, with such capabilities supported by regular testing.

Ms McMunn noted that all the above are consent with DORA but are coming into sharper focus given the potentially accelerating risk.

Secondly, the Deputy Governor addressed the complexity of the regulatory framework, highlighting that regulators should be open to challenge, accountability and review. She emphasised that the Central Bank has improved its engagement and processes over the last number of years, pointing to its simplification agenda as set out in its December 2025 roadmap for more effective and efficient regulation and supervision – for more information, see FIG Top 5 at 5 dated 11 December 2025.

Conclusion

 

The Deputy Governor concluded her remarks by noting that central banks and regulators play a key role when it comes to competitive, productive economies, by underpinning growth and competitiveness, rather than promoting them, through monetary and financial stability.

On 11 May 2026, the Anti-Money Laundering Authority (“AMLA”) published a consultation (“Consultation”) on draft regulatory technical standards (“RTS”) regarding the respective duties of home and host supervisors and practical arrangements as regarding their cooperation under article 46(4) of directive 2024/1640 (“AMLD6”).

The draft RTS take account of the fact that effective, timely and sustained cooperation between supervisors is important for the integrity of the financial system. The RTS relate to supervisors of groups of obliged entities operating across borders in the financial and non-financial sectors, and form part of a broader cooperation framework that also includes AML / CFT supervisory colleges and cooperation guidelines.

The draft RTS establish a baseline framework for home / host supervisory cooperation applicable to supervisors of cross-border groups of obliged entities, clarifying their respective duties.

Some of the areas addressed by the draft RTS are as follows:

• practical arrangements, including request procedures, acknowledgement and response obligations as well as channels of communication;
• the modalities of information exchange between home and host supervisors. In addition to exchanges on request, both home and host supervisors are required to share information on their own initiative where that information could significantly influence the assessment of the inherent or residual risk exposure of an obliged entity in another member state;
• article 7 of the draft RTS covers cooperation in the context of cross-border inquiries; and
• article 8 of the draft RTS sets out a framework for agreed common approaches regarding the supervision of cross-border groups. Home and host supervisors are expected to engage in regular exchanges with a view to identifying, where appropriate, opportunities for common supervisory approaches.

Next Steps

 

The AMLA will hold a public hearing on the draft RTS on 28 May 2026, during which, stakeholders will be able to submit feedback, particularly on the specific questions set out in section 5.2 of the Consultation. Interested parties can register here.

1. EBA publishes final report amending guidelines on application of definition of default under CRR

 

On 7 May 2026, the European Banking Authority (“EBA”) published its final report (“Report”) amending guidelines (“Guidelines”) on the application of the definition of default under article 178 of the Capital Requirements Regulation (“CRR”), as amended by the CRR III Regulation.

The EBA consulted on the Guidelines in July 2025 – for more information, see FIG Top 5 at 5 dated 10 July 2025.

The targeted amendments to the Guidelines address:

• specific technical aspects of the past-due treatment of non-recourse factoring – the specific technical past-due treatment at the individual invoice level has been extended from 30 to 90 days, with the EBA explaining that this position better reflects the operational features of invoice-based receivables and reduces the risk of incorrect default classifications;
• necessary updates on foot of the amendments made by CRR III, for example, the removal of the reference to the previous 180 day past due discretion in point (b) of article 178(1) CRR or the reference to distressed restructuring; and
• the 1% threshold for the net present value loss in debt restructuring has been maintained, with the Report stating that the current framework is sufficiently flexible and risk sensitive such that it will not result in wrong default identifications. Additionally, the Report highlights that amending the framework would hamper efforts made in the wake of the great financial crisis to reduce the level of non-performing loans.

Next Steps

The Guidelines will be published in all official languages of the EU and published on the EBA’s website with the Guidelines applying two months after the translations are published.

 

2. EBA launches consultation on amendments to supervisory slotting criteria approach for specialised lending exposures under CRR

 

On 7 May 2026, the European Banking Authority (“EBA”) published a consultation (“Consultation”) on proposed amendments to delegated regulation (EU) No 2021/598 (“Delegated Regulation”)  regarding the regulatory technical standards (“RTS”) on the assignment of risk weights to specialised lending exposures under the capital requirements regulation (“CRR”).

Specialised lending exposures refer to exposures to entities created primarily to finance or operate physical assets, where repayment depends mainly on income generated by those assets, with lenders having significant control over the assets and related income.

Under the Internal Ratings Based Approach, as a fallback approach, institutions may assign supervisory risk weights and expected loss values based on maturity and classification into five credit risk categories which is also known as the Supervisory Slotting Criteria Approach (“SSCA”).

The proposed amendments take the following into account:

• the need to update the RTS due to changes introduced by the revised capital requirements regulation (“CRR 3”), mainly regarding new definitions and terminology;
• the Delegated Regulation does not contain references to ESG factors, so the proposed RTS contain several proposals for references that could clarify the supervisory expectation regarding how ESG factors should be taken into consideration when applying the SSCA criteria; and
• the promotion of a simplified and harmonised application of the SSCA criteria by leveraging supervisory experience gained since the Delegated Regulation was published in 2021 by, for example, amending several criteria by specifying new sub-factors or-sub-factor components.

Next Steps

The Consultation is open for feedback until 7 August 2026. Comments regarding all proposals are welcome, particularly on the specific questions summarised in section 5.2.

On 6 May 2026, the European Securities and Markets Authority (“ESMA”) published a public statement (“Statement”) setting out the results of the common supervisory action (“CSA”) of MiFID II sustainability aspects.

ESMA announced the launch of the CSA in October 2023 – for more information, see FIG Top 5 at 5 dated 5 October 2023.

The Statement summarises the findings of the CSA, highlighting key themes and providing some high level interim supervisory expectations on a few key areas aimed at fostering consistent implementation while reducing burden during the current transition period.

Overall, the results show that firms have continued to make progress in integrating the MiFID II sustainability requirements into their suitability and product governance processes, however some practices remain uneven across firms and jurisdictions, with improvements required in several areas.

Some further findings are as follows:

• most firms have implemented at least some measures to help clients understand the new terms and concepts related to sustainability preferences and the choices to be made in this regard, however, many firms reported challenges regarding explaining the regulatory definition of ‘sustainability preferences’;
• overall, firms have taken material steps to incorporate the new requirements into their suitability framework, with the results of the CSA indicating a move towards more detailed and specific questionnaires. However, the level of detail differs significantly across firms and jurisdictions;
• in some jurisdictions, certain firms follow a practice whereby clients expressing a general interest in sustainability, without specifying detailed preferences, are considered as not having any sustainability preference; and
• firms take different approaches when clients express detailed preferences across more than one of the three product categories set out in the definition of sustainability preferences.

Some of the high level interim supervisory expectations set out in the Statement include:

• firms are encouraged to further reinforce their processes over time, to ensure that clients’ sustainability preferences are collected in a clear, neutral and sufficiently detailed manner;
• ESMA expects firms to apply a proportionate approach to updating clients’ sustainability preferences. Firms should avoid re-collecting preferences where recent and relevant information is already available, unless there is a material reason to believe the client’s circumstances or preferences have changed;
• firms are encouraged to continue strengthening the consistency of their product-categorisation processes;
• firms are encouraged to ensure that the documentation related to clients’ sustainability preferences, the matching process and any adaptations made is sufficiently complete, clear and traceable; and
• firms should continue refining the way they define sustainability-related product objectives over time to enable a meaningful and accurate match with clients’ sustainability preferences.

Simplification and burden reduction

 

In the Statement, ESMA acknowledges that the CSA has been carried out at a time when the wider sustainable finance framework is undergoing significant revision. Accordingly, ESMA invites NCAs to adopt a proportionate supervisory approach, encouraging dialogue with firms to address identified issues during this period of transition rather than prioritising enforcement actions, without prejudice to cases involving clear breaches or mis-selling.

Next Steps

 

ESMA has stated that it will consider the results of the CSA regarding any future updates of the MiFID II delegated acts on sustainability and the related ESMA guidelines, with the aim of simplifying the framework and supporting more consistent and effective application.

1. MiCA single rulebook Q&As are updated

 

On 8 May 2026, the European Banking Authority (“EBA”) updated the single rulebook questions and answers (“Q&As”) under regulation (EU) 2023/1114 (“MiCA”).

The questions relate to the following matters:

• question: 2024_7168 dealing with the passporting procedure for credit institutions (“CIs”) and e-money institutions (“EMIs”) issuing tokens under MiCA. This question queries whether articles 146 and 48(3) of MiCA are to be interpreted as submitting CIs and EMIs issuing ARTs / EMTs on a cross-border basis to comply with the existing passporting framework set for these categories of establishments respectively by Directives 2013/36/EU (“CRD”) and 2009/110/EC (“E-Money Directive”).

The answer, which was prepared by the European Commission (“Commission”), confirms that articles 146 and 48(3) of MiCA are to be interpreted as suggested in the question;

• question: 2024_7166 dealing with the publication of white papers under article 16 of MiCA. This question, which was submitted by the Central Bank of Ireland, queries whether article 28 on publication of white papers of ART issuers also applies to issuers exempt under article 16(2) of MiCA.

Exempted issuers notify their white paper to the competent authority of the home member state, which forwards it to the European Securities and Markets Authority (“ESMA”). The reference in article 28 to ‘approved’ white papers had caused uncertainty about the public‑availability obligations for notified white papers.

The answer, which was prepared by the Commission, clarifies that article 28 applies to ART issuers exempted under article 16(2). Accordingly, notified white papers must be made publicly available in accordance with article 28, with the home competent authority and ESMA discharging their respective notification and dissemination roles.

• question 2024_7084 dealing with qualification of crypto-asset service in case of exchange of EMTs for other crypto-assets. This question queries whether exchanging EMTs for other crypto‑assets should be treated as an exchange of crypto‑assets for crypto‑assets or as an exchange of funds for crypto‑assets, flagging potential payment services directive (“PSD2”) consequences where a crypto-asset service provider (“CASP”) collects funds for third parties.

The answer, which was prepared by the Commission, explains that, although EMTs are deemed to be electronic money under article 48(2) of MiCA and so are considered to be electronic funds, they are, in fact, defined, in article 3(1), point 7 of MiCA, as a type of crypto-asset and should therefore be considered as such for the purpose of interpreting them within the scope of crypto-asset services governed by MiCA.

 

2. SRB launches consultation on operational guidance on liquidity and funding in resolution

 

On 11 May 2026, the Single Resolution Board (“SRB”) published a consultation (”Consultation”) on a draft of its operational guidance (“Guidance”) for banks on liquidity and funding in resolution.

The SRB had previously published three operational guidance documents and now proposes to merge the three documents into a single document. This is aimed at crisis readiness, with the SRB explaining that past banking crises, outcomes of SRB resolvability assessments and recent policy developments pointed to the need for targeted enhancement of the previous guidance.

The Guidance updates the methodological assumptions banks should use to estimate liquidity and funding needs, including the duration of the fast-moving scenario. It also includes details on expectations for governance arrangements for the measurement and reporting of the bank’s liquidity situation, and on the granularity of collateral-related information.

The SRB explains that the draft Guidance does not introduce any new deliverables for banks, rather it contains clarifications and optional templates that banks can use to show compliance with expectations.

Next Steps

The Consultation is open for feedback until 6 July 2026. The SRB has stated that it will engage with the banking industry and other relevant stakeholders to address any questions before the end of the consultation period.