26 August 2026
The Central Bank of Ireland’s (the “CBI”) recent review of delegation in the Irish funds sector looked at five main areas: governance, portfolio management, risk management, delegate oversight and data capabilities. Its findings were positive overall, with most fund management companies (“FMCs”) found to have good governance, oversight and controls in place.
However, a small number of firms fell materially short of expectations and are being required to address the weaknesses identified. The report also highlights areas where some FMCs need to do more, including local decision-making, board independence, resourcing, access to data and planning for the loss of a delegate.
By the end of this year, each FMC is expected to discuss the report with its board, look at how its arrangements work in practice and put in place a plan with clear deadlines to address any gaps.
For most FMCs, this shouldn’t require any major changes to the delegation model. It is more about carrying out an exercise to assure the current arrangements work as intended and the FMC has evidence of this available.
Many FMCs use group staff, systems and committees. These arrangements can work well. The concern is whether the FMC still has enough influence and can show that it makes its own decisions.
One useful exercise is to pick a few significant issues from the last year and trace how they were handled. The records should show how the issue came to light, who reviewed it, what challenge was provided, and who made the final decision. If a group committee was involved, the FMC should be able to show that it considered the matter itself and reached its own conclusion.
The review should also check that governance documents are specific to the FMC and its operating model, rather than relying mainly on group policies or informal working practices.
The board and committee minutes will be an important part of evidence. They do not need to be lengthy, but they should show the key issues discussed, the questions raised and the outcome. If the minutes only record that reports were “noted”, it may be difficult to demonstrate meaningful oversight.
The CBI’s comments also make it worth taking a fresh look at board composition. In a small number of cases, the CBI identified concerns about excessive group influence, sometimes alongside lengthy director tenure. Meeting the formal requirements isn’t enough. The board also needs to be able to challenge decisions when necessary.
Even a good oversight framework will struggle if the people running it do not have enough time, experience or authority. The CBI found cases where designated persons were not senior enough, were covering too many roles or needed more support. Some risk management functions also needed stronger resources.
This is best assessed by looking at the work being done in practice. The FMC should consider the number and complexity of the funds and delegates involved, how often issues need to be investigated or escalated, and whether there is enough cover during busy periods or absences.
If the FMC uses group staff or secondees, the arrangement should be clear and this can be achieved through written agreements, including individual secondment agreements. The FMC should know when those people are available, who directs their work and how they are accountable locally. An organisation chart may set out the structure, but it will not show whether there is enough capacity to make it work.
The review should also consider whether Designated Persons and the Operational Risk function are sufficiently involved in delegate oversight, particularly where a lot of the supporting work is carried out by group or seconded staff.
Most FMCs already receive regular reports from delegates and carry out periodic due diligence. The more useful question is what happens with that information.
Reports and questionnaires are only useful if the FMC reviews the information critically, follows up on concerns and tracks agreed actions to completion. Group processes may support this work, but shouldn’t replace the FMC’s own assessment of the delegate.
The FMC should also step back and look at the delegation model as a whole. It needs to keep enough knowledge and control within the business to oversee the work properly and make its own decisions.
For a portfolio manager, the review is likely to cover performance, compliance with the investment mandate, liquidity, leverage, breaches, operational incidents and important changes to staff, systems or controls.
The FMC should know what would prompt further questions and when an issue needs to be escalated. Actions agreed with the delegate should be tracked through to completion.
Material sub-delegates should be covered as well. The FMC should know what work has been passed on, who is doing it, where it is being done and how the main delegate is supervising it.
On-site visits should have a clear purpose. They will be more useful if they focus on a particular risk or concern, rather than being treated as a routine annual exercise. Any findings should be recorded and followed up.
Reliable data is essential for proper oversight, especially where another firm supports or carries out risk management work. If a delegate calculates risk, monitors investment restrictions or operates trading controls, the FMC should be able to explain how it checks that work. It should also know how quickly it will hear about breaches and exceptions.
Particular attention should be given to any arrangement under which a delegate can override an internal risk limit or control. The authority, rationale, notification and subsequent FMC review should be clearly documented.
The CBI found that timely and accurate data made a real difference to the quality of risk oversight. It also identified situations where firms relied on disconnected systems, manual workarounds and had not adequately planned for what would happen if key data became unavailable.
This calls for a practical look at where the FMC’s information comes from, who checks it and what would happen if it stopped arriving. If the FMC depends entirely on the delegate to spot and fix a problem, the arrangement may need to be strengthened.
The same applies to exit planning. A contractual right to terminate a delegate is useful, but it does not explain how the funds would continue to operate afterwards.
For each key delegate, the FMC should have a realistic view of how the activity could be moved, who might take it over and how the records and data would be obtained. It should also be clear who would manage the change and what communications might be needed.
If the plan assumes that another group company or provider could step in, that assumption should be checked. The proposed replacement may not have the capacity, systems or information needed to take over at short notice.
The year-end review should produce four useful outputs:
It is worth separating problems with documentation from more serious weaknesses. A process may work well but be poorly recorded, which may be fairly easy to fix. A lack of authority, resources, reliable data or workable back-up arrangements will need a more substantial response.
Actions should only be closed once the change is working. Updating a policy may be part of the answer, but it will not help much if the people applying it still lack the time, information or authority to do the job properly.
The CBI is also reviewing the wider governance framework for FMCs. Its work during 2026 will look at the existing FMC guidance, the PCF framework, governance requirements and whether the Individual Accountability Framework and SEAR should apply proportionately to the funds sector.
The year-end exercise should therefore not be treated as a one-off. FMCs will need to keep an eye on this wider review and consider whether further changes are needed as it develops.
The report doesn’t call the delegation model into question. The CBI accepts that delegation is an established and necessary part of the Irish funds sector. The bottom line is that the FMC must stay in control of the work carried out on its behalf.
The most useful review will be based on how the business operates day-to-day. Can the FMC get the information it needs? Does it make and enforce its own decisions? Does it challenge a delegate when something does not look right? Could it keep the funds operating if a key delegate failed?
In many respects, that is the real test of effective governance. Delegation may be essential, but responsibility cannot be delegated.
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