Outcomes-Focused Supervision in Practice

In a speech delivered earlier this week, Mary-Elizabeth McMunn, Deputy Governor for Financial Regulation at the Central Bank of Ireland, explored what outcomes-focused regulation and supervision means in practice.

McMunn explained that outcomes-focused regulation is not new, but that its delivery must evolve alongside the financial system. Rules must be clear, unambiguous, and enforceable, she argued, and regulation alone is insufficient without robust, risk-based supervision to complement it. “The rule, the supervisory process or the remediation of an issue is not a box to be ticked or an end in itself,” she said, “but rather a means to a broader end and an enduring step towards a broader outcome.”

McMunn also emphasized the importance of supervisory culture. Good supervision requires both the ability and the willingness to act, she argued. “Similar to firms, it is the responsibility of leaders within supervisory bodies to cultivate this culture, through their actions and their tone from the top,” she said. They should also support front-line supervisors in doing their jobs, including intervening proactively and in a timely manner. “For no matter how well evidenced, well thought out, if the supervisory intervention comes too late then it is no intervention at all,” she added.

McMunn pushed back against the idea that simplification means fewer rules or a regulatory pause. Simplification should be about achieving the same outcomes in a more effective and efficient manner, she contended. “Done badly, simplification could fundamentally jeopardise” the protections built into the system, she asserted. The Central Bank published a simplification roadmap late last year and continues to engage with the agenda domestically and internationally.

“[O]utcomes focused regulation and supervision is core to our approach at the Central Bank,” McMunn concluded. “This is key as our financial sector continues to grow, becoming more interconnected and complex; and it is imperative that we and financial regulation more broadly continues to evolve in the face of a rapidly evolving external environment, so we can continue to deliver on our outcomes and our mandate in the face of this change.”