This shift is not happening in isolation. Messaging from European regulators, including ESMA, the ESAs and the ECB, points in the same direction. Market stress risks remain elevated, vulnerabilities in private markets are increasing and the rapid adoption of AI is introducing new layers of complexity.
For boards, the implication is straightforward. Oversight expectations have moved beyond understanding outputs. Regulators now expect boards to challenge the assumptions, data and models that sit behind them.
The regulatory emphasis has evolved in a noticeable way.
Inflation and interest rate risk have eased sufficiently to fall back as standalone concerns. In their place, other risks have intensified and now demand greater board attention:
At a European level, the message is consistent. Supervisors are increasingly focused on resilience under stress, rather than stability in benign conditions. There is also a clear concern around opacity, particularly in private credit, private equity and other hard-to-value assets.
This is not a technical recalibration. It is a shift in supervisory mindset. Boards should read it as part of a broader direction of travel rather than a standalone update.
The CBI’s concerns on valuation are both specific and practical.
It highlights stretched valuations across equity and debt markets, alongside the potential for rapid changes in sentiment. Particular attention is drawn to private assets, where transparency is limited and pricing often depends on models or expert judgement.
There is also a forward-looking dimension. The outlook notes that AI-related valuations could reprice sharply if expectations around adoption or profitability shift.
In response, the CBI has announced a 2026 thematic review of hard-to-value assets, including private equity, private credit and other illiquid securities. The focus will be on governance, policies, models and controls.
This builds on earlier supervisory findings, which identified recurring weaknesses:
Taken together, these findings point to a consistent issue. Where reliable market prices are absent, valuation becomes less about calculation and more about governance.
For boards, the key question is not whether valuations are produced, but whether they are controlled, evidenced and challengeable.
Alongside valuation, the CBI places equal emphasis on data, modelling and AI.
The increasing use of third-party AI tools and advanced models is changing how decisions are made across financial institutions. While this brings efficiency and analytical power, it also introduces new risks, particularly where governance frameworks have not kept pace.
One of the more direct messages from the CBI is that poor data quality is rarely just a systems issue. More often, it reflects weaknesses in governance, ownership and resourcing. Short-term fixes and workarounds remain common, but supervisors are increasingly focused on longer-term structural improvements.
This concern is echoed at European level. ESMA continues to push firms on valuation practices and AI usage in investment services. The ECB has maintained risk data aggregation and reporting as a supervisory priority. Recent supervisory assessments show that progress in these areas remains uneven, with recurring issues including weak data architecture, insufficient controls and limited board-level prioritisation.
For boards, this shifts the conversation materially. It is no longer enough to ask whether a data or model programme exists.
The more relevant questions are:
Without clear answers to these questions, oversight remains partial.
An effective board response should be both integrated and proportionate.
It should be integrated because valuation risk, model risk and data risk are closely linked. They often depend on the same inputs, assumptions, third parties and reporting structures. Addressing them in isolation creates blind spots.
It should be proportionate because the nature of the risk differs across sectors. Banks, funds, SPVs and other financial institutions will each face different manifestations of the same underlying issues.
Despite these differences, supervisory expectations are consistent. Boards are expected to demonstrate:
The underlying message is simple. Governance frameworks must be capable of withstanding scrutiny, not just producing outputs.
While the themes are common, their application varies by sector:
| Sector | Board focus | What can go wrong |
| Banks | Risk data aggregation, internal models, AI in decision-making, model-change governance. | Fragmented data, model drift, weak validation, poor explainability and manual workarounds. |
| Funds / SPVs | Hard-to-value assets, pricing, investor disclosure, transaction data, delegated oversight, reporting | Stale pricing, over-reliance on judgement, weak validation, pricing opacity, poor error formalisation, reliance on servicers, administrators, trustees and external data with weak end-to-end challenge. |
| MiFID / Payments & E-Money | Fraud and customer outcome models, reliance on third party/vendor solutions, data quality | Model opacity, underestimation of tail risks or scenario impacts, over-reliance on expert judgement. |
| Insurance | Pricing, underwriting, claims | Operational Models – Lack of model inventory, weak accountability, limited explainability, weak ethics/fairness considerations.
Financial reporting models – Insufficient challenge to modelled results, lack of appreciation of uncertainty around future outcomes, out of date model governance. |
As expectations increase, boards should be actively challenging management across four areas:
The direction of travel from the CBI and wider European regulators is clear. Valuation, modelling and data are no longer specialist technical topics. They are central to governance, resilience and decision-making.
The firms best placed to navigate this environment will be those where boards can not only understand outputs, but confidently interrogate the assumptions, data and methodologies that underpin them.
The question for the year ahead is not whether expectations will increase. It is whether boards will respond with integrated oversight before the regulator or a market event forces the issue.
At Forvis Mazars, we work with boards and senior management across financial institutions to strengthen valuation, model and data governance frameworks – from independent price challenge and valuation oversight to model validation and regulatory readiness.
Our focus is on helping boards move from awareness to evidence, with frameworks that stand up to both regulatory scrutiny and real-world stress.
The revision of Solvency II represents a significant evolution of Europe’s prudential framework for insurers, with the dual aim of strengthening resilience while enhancing the sector’s capacity to support long-term investment.
The European Banking Authority (EBA) has published a report examining how banks test the implementation of their recovery plans through so called dry runs. The report compares current practices across the EU and assesses how effectively dry runs support institutions’ preparedness for periods of severe financial stress.
The Central Bank of Ireland’s 2026 Regulatory & Supervisory Outlook sends a clear and consistent message to boards: valuation, data and model risk are no longer technical issues. They are core governance priorities.
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