The Central Bank is seeking views from interested parties on its approach to developing a broad policy framework for investment funds.

The regulator says that the size of the funds sector globally has grown significantly in recent years, and that it is playing an increasingly important role in the global financial system and the economy.

The watchdog yesterday (18 July) published a discussion paper on how the sector could be regulated in future, in order to prevent risks from spilling over into the wider financial system.

Stresses

The Central Bank stated that, while increased financial intermediation through the funds sector could bring many benefits, it could also involve “risks that, in certain circumstances, can become systemically relevant”.

“A macroprudential framework for the funds sector would take a system-wide perspective and aim to ensure that this growing segment of the financial sector is more resilient to stresses and less likely to amplify adverse shocks,” it said.

“In turn, this would better equip the sector to serve as a resilient form of financing, supporting broader economic activity,” it added.

Ireland a hub

The Central Bank of Ireland is now seeking feedback on a number of issues raised in the discussion paper to feed into further analysis and policy work.

Feedback can be provided, via a survey, by 15 November 2023.

The Central Bank will publish a statement on the submissions received next year.

Deputy Governor Vasileios Madouros (pictured) said that the Central Bank was actively working with colleagues and institutions across the world in this area.

According to the bank, the investment-fund sector represented around 17% of all global financial assets in 2021, and grew from just over €18 trillion in 2008 to €72 trillion in 2021.

Ireland is now one of the world’s largest hubs for investment funds, hosting the largest money-market-fund sector in Europe, as well as Europe’s biggest centre for ETFs (exchange-traded funds).