Welcome to the FIG Top 5 at 5

1. Central Bank of Ireland launches first Financial Stability Review of 2026

 

On 27 May 2026, the Central Bank of Ireland (“Central Bank”) published its first Financial Stability Review (“Review”) of 2026. The Review provides an evaluation of the main risks facing the financial system and assesses its resilience to those risks, with the goal of ensuring the financial system can provide services to Irish households and businesses in both good and bad times.

The Review is the first edition of the year and focuses on the Central Bank’s assessment of the main risks facing the Irish financial system over the short to medium term. The Review is informed by the deliberations of the Central Bank’s Financial Stability Committee and focuses on adverse outcomes that may materialise and their potential implications for domestic financial stability.

A high-level overview of both the global and domestic risk assessments detailed in the Review is provided in the note on the Governor’s remarks below. For the purposes of this note, we are focusing on the Review’s special focus (“Focus Piece”) on the domestic financial stability implications of developments in AI financing.

The Focus Piece examines the financial stability risks stemming from developments in AI financing, considering interactions between AI-related risks, together with their direct effects on the domestic financial system. The matter is considered under two main headings, as set out below:

Financial market developments and financing of AI

Under this heading, some of the matters highlighted include:

• equity markets have become increasingly concentrated around a small number of very large technology companies, known as hyperscalers, which has driven market growth in recent years. However, the Focus Piece points out that financial markets face different AI related risks, for example, that AI could exceed expectations leading to disruption of existing business models in certain sectors; and
• investments in AI infrastructure are accelerating, and so far, have been mainly funded by profits, however, further financing of AI is likely to increasingly come from a combination of public and private credit, increasing contagion risks to credit supply and investment.

Transmission channels of an AI-related financial market shock

Under this second main heading, direct exposures and financial system resilience to market risk are discussed. In that regard, some of the areas covered / matters considered are as follows:

• Irish households have a relatively low direct equity risk compared with the euro area, though this varies by income, with the Focus Piece highlighting Ireland’s relatively low levels of retail participation in capital markets, despite the accumulation of savings over the course of the pandemic;
• Irish banks have limited direct exposures to AI-related investments but would not be immune to indirect or second-round effects, with the Focus Piece noting that:
  • another potential channel of direct exposure is through the financing of data centres and while such exposure is small at the moment given constraints around construction, it could increase if more projects become viable and hyperscalers chose not to self-finance; and
  • even though direct exposures are low, market risk can be material for certain banks given their trading exposure and funding composition, leaving them vulnerable to general market shocks.
• when it comes to insurance companies, the Focus Piece highlights that insurance companies allocate a relatively insignificant portion of non-linked investments to US equities. While linked investment exposures are more significant, strong capital buffers mitigate risks, with the Focus Piece noting that:
  • European insurance firms are subject to stress testing at an EU and national level, incorporating market shocks, with results showing sufficient capital coverage, but as with the banking sector, there are caveats when considering the current risk environment.

Conclusion

The Focus Piece concludes by noting that direct exposures to AI-related investments across the non-financial and traditional financial sectors in Ireland are small, with the impact of an AI-related financial market shock on the domestic financial system most likely being transmitted through second-round effects, including through tighter global financing conditions and the impact on the US growth outlook.

 

2. Governor Makhlouf’s comments on the launch of the Central Bank of Ireland’s Financial Stability Review

 

On 27 May 2026, the Central Bank of Ireland (“Central Bank”), published its first Financial Stability Review (“Review”) of 2026. At the launch of the Review, Governor Gabriel Makhlouf, delivered opening remarks (“Remarks”) on the Review which provide a useful note on the Review.

At the outset, the Governor stated that, in 2026, the risks facing the domestic financial system from the global environment “have intensified”, and remain elevated, due to pricing and sustainability of global energy supplies since the start of the war in the Middle East, increasing the potential for “tail systemic risks.”

Governor Makhlouf highlighted that the European Central Bank also published its financial stability report on 27 May 2026 and shows that financial stability vulnerabilities in the euro area remain at an elevated level.

Global risks

These global developments have resulted in a weakened “global growth outlook” and increased inflationary pressures. Some of the risks highlighted by the Governor at the beginning of his Remarks are as follows:

• increasing risks posed by a prolonged energy price shock, enhancing the risk of a sudden tightening of global financial conditions, noting that the growing role of highly leveraged, global, non-bank financial intermediaries in key financial markets compounds this “amplification channel”;
• high valuations regarding AI-related stocks, increasing the potential for a market correction or sector level disruption, if, for example, predicted high earnings do not materialise. The Governor addressed other risks to financial stability related to AI – see the note above on the AI focus piece;
• heightened geopolitical tensions and rapid advancements in AI lead to an “evolving cybersecurity landscape”. Here, the Governor flags that the financial system will need to continue to evolve with technology to ensure that there is limited disruption to core financial services.

Resilience in the domestic financial system

The Governor highlighted the “accumulated resilience currently evident across the domestic financial system”, which he noted acts as a counter balance to the higher external risks. In this regard, the Governor also noted that growth in the underlying domestic economy, together with strong performance in the multinational sector has helped to build up a “strong buffer” over recent years.

Prudential policies and guidance

The Governor pointed out that the Central Bank promotes the preservation of financial system resilience to traditional financial risks and emerging non-financial risks through its prudential policies and guidance.

In terms of limiting the intensification of external shocks through the financial system, the Governor highlighted that the Central Bank will continue to focus on:

• operational resilience;
• prudent lending standards; and
• the maintenance of buffers of loss-absorbing capital and liquidity.

Banking

Here, Governor Makhlouf stated that the domestic banking system “has limited direct exposures to core private credit activities or to US large technology company equities.” This is based on internal estimates. However, the Governor cautioned that the sector could be vulnerable to second round effects from shocks in those markets or to a decline in borrower resilience if economic conditions deteriorate. It was in this context that the Governor announced that the countercyclical capital buffer rate is to be maintained at 1.5%.

Regulatory standards and cooperation

The Governor concluded by emphasising the importance of adhering to and preserving global regulatory standards and continuing to maintain international cooperation as regards financial stability.

Press release

The Central Bank also published a press release (“Press Release”) as regards the publication of the Review, stating that:

“A persistent global energy supply shock triggered by the conflict in the Middle East, the risk of a correction in financial markets, potentially amplified by financial vulnerabilities in parts of the global non-bank sector, and increasing cyber risks could create challenges for Ireland. If the conflict persists for longer than expected, there is the potential for more than one vulnerability to be triggered at the same time.”

The Press Release highlights that Ireland’s financial system is in a strong position and that such resilience must be protected.

On 26 May 2026, Deputy Governor at the Central Bank of Ireland (“Central Bank”), Vasileios Madouros, delivered a speech (“Speech”) at the National Financial Conference 2026. The Speech focused on the potential changes to finance stemming from tokenisation and then considered the Central Bank’s response to the emergence of tokenised finance.

Transformative

Acknowledging the transformative potential of tokenised finance, some of the matters highlighted by the Deputy Governor, particularly regarding the benefits offered by tokenisation in finance, are as follows:

• tokenisation, and the use of distributed ledger technology (“DLT”), enables a move to shared ledgers, allowing various parties to simultaneously agree on and update these ledgers. It also enables programmability of transactions, in that shared ledgers will contain information that allows for the execution of transactions based on predefined conditions;
• tokenisation can make financial services much more efficient due to its enabling of real-time or near-instant settlement in markets / reduced counterparty exposure / round the clock availability / lower operational costs; and
• tokenisation can support the development of new services such as smart contracts, which the Deputy Governor notes, “have a range of possible applications in wholesale markets and in retail financial services.” Additionally, tokenisation can broaden retail participation in capital markets.

The Deputy Governor stated that “we are still at the very early stages of this evolution” although market interest in tokenisation is growing at a rapid rate, with financial institutions building capabilities, piloting use cases and investing in the underlying infrastructure.

System-wide evolution and an uncertain future end state

Deputy Governor Madouros then turned his attention to matters related to how we navigate the transition towards tokenised finance, highlighting two “realities”.

Firstly, he emphasised that technology alone will not deliver the benefits associated with tokenisation and that a “system-wide evolution” is required, giving the example that, in order to unlock tokenised finance’s true potential, tokenisation of assets and money must be considered together. Additionally, the Deputy Governor highlighted that there will need to be interoperability across systems, networks, and jurisdictions.

The second of the “realities” that the Deputy Governor addressed is that we do not know for certain what the exact configuration of the future financial system will be. He stated that tokenisation can “rewire the technological underpinnings of finance” but also has the potential to reshape the structure of the system. The Deputy Governor proceeded to illustrate this point by way of three examples, as follows:

• the evolution of private money – here, he particularly considered the use of tokenised bank deposits, as opposed to stablecoins, noting that they can “harness the technological benefits of DLT, within the existing two-tier monetary architecture” and accordingly, they pose less risk and better support the credit creation mechanism. The Deputy Governor also highlighted the importance of maintaining trust that “a unit of currency has the same value regardless of who issues it.”;
• the shape of the capital markets ecosystem – the Deputy Governor discussed the fact that tokenisation may change the role of current regulated intermediaries, such as, central securities depositories (“CSDs”), custodians, or clearing houses with the possibility that some functions may be subsumed into smart contracts or distributed ledgers. In this regard, he sounded a note of caution in that roles and activities that are currently subject to regulatory oversight frameworks may fall outside such regulatory remit. The Deputy Governor also acknowledged the opportunity offered by the reshaping of Europe’s capital markets to supporting their deepening and integration; and
• the future configuration of the underlying DLT infrastructure – here, the Deputy Governor considered the different formats that a future DLT ecosystem could take, noting that such questions remain open but that different options do matter when it comes to “ultimate economic outcomes”, such as competition and innovation at the infrastructure level / integration of liquidity across markets / governance and accountability.

Central Bank’s response

In the latter part of his Speech, the Deputy Governor discussed the response of the Central Bank to the emergence of tokenised finance, stating that its “overall stance is positive”. He set out the Central Bank’s position that there is a need for broader foundations to be in place to realise the full benefits of tokenisation, highlighting that the Central Bank is focused on providing many of those foundations. In that regard, some of the areas he addressed are as follows:

• the evolution of central bank money – here, the importance of central bank money continuing to act as an anchor of financial stability for the financial system and the broader economy, was emphasised. In that regard, the Deputy Governor pointed to the following initiatives:
  • on the wholesale side of things, the Eurosystem project aimed at enabling settlement of DLT-based transactions in central bank money; and
  • as regards the retail side, the digital euro project, setting out that Central Bank’s role in terms of contributing to design and preparation.
• the acceptance of DLT-based assets as eligible collateral – highlighting that in March 2026 the Eurosystem started to accept marketable assets issued in central securities depositories using DLT. In addition, the Deputy Governor stated that a workplan has been launched to explore if, how and under what criteria, assets issued using DLT could become eligible as Eurosystem collateral in the future.
• regulation and supervision – here, the following matters were highlighted:
  • the regulatory framework has already adapted to the growth of digital assets with the regulation on markets in crypto assets (“MiCA”), with the Deputy Governor highlighting that the Central Bank has a well resourced and expert team in place to supervise these newly authorised entitles;
  • as tokenisation becomes more embedded in finance, it will become more relevant to all aspects of the Central Bank’s supervisory work;
  • the innovation sandbox, representing the responsive approach of the Central Bank to regulation and supervision – for more information, see FIG Top 5 at 5 dated 25 September 2025; and
  • the Central Bank’s March 2026 discussion paper on tokenisation – for more information, see FIG Top 5 at 5 dated 12 March 2026.

On 26 May 2026, the European Securities and Markets Authority (“ESMA”) launched a consultation (“Consultation”) on updated guidelines (“Guidelines”) on standardised procedures and messaging protocols used between investment firms and their professional clients under article 6(2) of the central securities deposit regulation (“CSDR”).

ESMA explains that the Consultation forms part of its work to support market participants regarding preparation for the transition to a T+1 settlement cycle – for more information, see FIG Top 5 at 5 dated 23 October 2025.

The amendments to the Guidelines are aimed at ensuring consistency with articles 2 and 3 of commission delegated regulation (EU) 2018/1229 on settlement discipline (“RTS on Settlement Discipline”), which were amended as set out in its final report on the RTS published in October 2025. ESMA consulted on the RTS on Settlement Discipline in February 2025 – for more information, see FIG Top 5 at 5 dated 20 February 2025.

The amendments, which include aligning the application date of the amended Guidelines with the application date of articles 2 and 3 of the RTS on Settlement Discipline, are designed to enhance settlement efficiency and support a smooth transition to T+1.

ESMA has also clarified the discretion available to investment firms and professional clients when documenting their contractual arrangements.

Some of the key changes are as follows:

• a reflection of the mandatory use of electronic standardised communication channels and international messaging standards; and
• the removal of references to non-electronic and non-machine-readable communication methods, for example, oral allocations and confirmations, except where there are temporary technical disruptions.

ESMA also welcomes suggestions as to potential amendments to the existing Guidelines that could support the overall objective of simplification and burden reduction.

Commission endorsement of RTS

ESMA has explained that the Consultation comes in advance of the formal endorsement of the RTS on Settlement Discipline by the European Commission so that stakeholders will have enough time to submit feedback and prepare for implementation. However, ESMA will reassess the situation at the time of endorsement of the RTS on Settlement Discipline.

Preparations

In the meantime, ESMA reminds market participants of the importance of continuing their preparations regarding the transition to T+1, which takes effect on 11 October 2027.

Next Steps

The Consultation is open for feedback until 7 July 2026 and, having considered the feedback, ESMA plans to publish a final report by October 2026.

The revised Guidelines will apply from 7 December 2026.

1. MiCA single rulebook Q&As are updated

 

On 22 May 2026, the European Banking Authority (“EBA”) updated the single rulebook questions and answers (“Q&As”) under regulation (EU) 2023/1114 (“MiCA”).

The question, which was submitted in May 2024, relates to issuers of electronic money tokens (“EMTs”) and the scope of anti-money laundering (“AML”) requirements. Specifically, the submitted question seeks clarity as to the extent to which electronic money institutions (“EMIs”) that issue EMTs under MiCA must comply with AML / TF requirements under directive (EU) 2015/849, as amended by directive (EU) 2018/843 (“AMLD5”).

The concern of the party who submitted the question centred around the point that if an issuer of an EMT is required to know the identity of the current holder of the EMTs on an ongoing basis, then that will have an impact on their tradability on the secondary market.

The answer, which was prepared by the European Commission, clarifies that under article 48(2), EMTs can only be issued by EMIs or credit institutions and that since they are obliged entitles under directive (EU) 2015/849 an amended by AMLD5, then they should comply with the customer due diligence rules prescribed for obliged entities under the EU’s AML / CFT framework. The answer further clarifies that neither MiCA nor directive (EU) 2015/849 an amended by AMLD5, provide an exemption.

Finally, the answer reminds readers that from 1 January 2026, responsibility for all EU-level AML / CFT tasks has moved from the EBA to the Anti-Money Laundering Authority.

 

2. AMLA holds public hearing on draft RTS on group wide requirements under articles 16 and 17 AMLR

 

On 22 May 2026, the Anti-Money Laundering Authority (“AMLA”) published a press release (“Press Release”) regarding the planned public hearing (“Hearing”) on draft regulatory technical standards (“RTS”) on group-wide minimum requirements and additional measures for subsidiaries and branches in third countries under articles 16(4) and 17(3) of regulation (EU) 2024/1624 (“AMLR”). The Hearing took place on 20 May 2026.

Article 16(4) AMLR aims to ensure that group-wide policies, procedures and controls are properly implemented. Article 17(3) aims to ensure that equivalent standards are maintained in third country jurisdictions.

The draft RTS are currently under consultation until 15 June 2026 – for more information, see FIG Top 5 at 5 dated 23 April 2026.

The Press Release contains a link to slides from the Hearing and cover key elements of the draft RTS, such as:

• minimum requirements regarding group-wide policies, procedures and controls under article 3;
• information sharing within a group under articles 4-8;
• minimum actions to be implemented by branches and subsidiaries in third countries under articles 10-14;
• additional measures for branches and subsidiaries in third countries under article 15;
• supervisory actions under article 16;
• the criteria for identifying the parent undertaking in the EU in cases of two or more obliged entities whose head office is located outside of the EU; and
• the conditions for the application of group-wide requirements to structures sharing common ownership, management or compliance control under section 6.

On 21 May 2026, the European Commission (“Commission”) adopted a delegated regulation (“Delegated Regulation”) supplementing the MiFID II directive with regard to regulatory technical standards (“RTS”) for the establishment of an EU code of conduct for issuer sponsored research.

The European Securities and Markets Authority (“ESMA”) published its final report on the draft RTS in October 2025, following a December 2024 consultation – for more information, see FIG Top 5 at 5 dated 30 October 2026.

The RTS aim to encourage a broader reliance on high-quality issuer-sponsored research, while striking the right balance between regulation and removing obstacles for issuers.

The RTS require investment firms, before using issuer-sponsored research or distributing it to their clients, to first assess whether such research was produced in line with EU conduct of business rules (the EU code of conduct for issuer-sponsored research). The RTS also aim to ensure that the ‘issuer-sponsored research’ label is used only for investment research paid for by the company concerned by that research and prepared in compliance with the EU code of conduct for issuer-sponsored research.

An annex to the Delegated Regulation contains the code of conduct.

Next Steps

The Delegated Regulation is now subject to the scrutiny of the European Parliament and the Council of the EU. It will be published in the Official Journal of the EU (“OJEU”) and enter into force, if neither institution objects to it, three days after its publication in the OJEU.