The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally. The analysis is based on the responses to a survey on suptech strategies and use cases and is supplemented by information from the two previous FSI Insights papers on suptech and by information from the online tracker developed by Regtech for Regulators Accelerator. FSI and the Regtech for Regulators Accelerator conducted this survey jointly. The analysis reveals that, while suptech is still in its infancy, it is gaining traction, with a significant number of suptech use cases found in the areas of misconduct analysis, reporting, and data management. However, most of these use cases are still experimental in nature.
Financial authorities have refined their use of technology over the years, leading to technologies that this paper would consider as suptech. The application of big data or artificial intelligence to tools used by authorities represents the latest generations of technologies that are considered to be suptech for the purposes of this paper. It is important for authorities to continue enhancing existing tools, including those not considered suptech. There are many ways of exploring suptech tools and these are not mutually exclusive. Most financial authorities covered in the paper either have suptech strategies in place or are in the process of developing them. A well-defined strategy can help authorities to optimally realize the potential benefits of suptech. However, for authorities that want to explore specific suptech tools first, before committing substantial resources, there are helpful avenues, such as innovation labs, accelerators, or tech sprints. These methodologies can also be included in authorities’ existing or future suptech strategies.
The paper mentions that the latest big data or artificial intelligence-centered generations of technology that supervisors are either using or exploring have emerged only recently. Most suptech solutions are still in either the experimental or the development stages. Suptech tools are applied mainly in misconduct analysis, reporting, and data management. These tools will support financial authorities in better tackling non-financial risks. The experimental nature of most suptech initiatives may have prevented a greater number of external parties from participating in the development of suptech solutions. Most solutions are being developed within financial authorities, or at least partly using internal resources, with only about a quarter being developed solely by external parties. This may be due to the experimental nature of these initiatives, among other reasons.
The paper notes that strategic partnerships with other authorities, academia, and research organizations will be important in overcoming the challenges associated with the experimental nature of these initiatives. The paper highlights that international coordination and collaboration could help to accelerate suptech development. Global standard-setting bodies and international organizations provide platforms for authorities to exchange information on their suptech initiatives. These international platforms could also be used to collaborate on the development of suptech solutions that may be useful to a number of authorities or to address the cross-border issues affecting suptech development. A good example is the recently announced BIS Innovation Hub, which is designed to foster international collaboration on innovative financial technology within the central banking community. Such platforms can help authorities to benefit from peer learning, including from different types of authority, helping to offset the lack of specialist providers. They also reduce the need for individual authorities to independently work on similar solutions, thus increasing efficiency.
Keywords: International, Banking, Suptech, Research, Regtech, Big Data, Reporting, FSI, BIS
Previous ArticleFASB Consults on XBRL US DQC Rules Taxonomy and Technical Guide
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.