ESMA Analyzes Impact of Regtech and Suptech for Markets and Regulators
ESMA published the results of its analysis of the regulatory and supervisory technologies—also known as regtech and suptech—being developed in response to various demand and supply drivers in the financial sector. The results of this analysis have been presented in an article in the latest Trends, Risks, and Vulnerabilities (TRV) Report of ESMA. The article discusses regtech applications by market participants and suptech applications by regulators, along with the associated challenges and benefits.
ESMA finds that on the demand side, regulatory pressure and budget limitations are pushing the market toward an increased use of automated software to replace human decision-making activities. This trend is reinforced by supply drivers such as increasing computing capacity and improved data architecture. Market participants are increasingly using new automated tools in areas such as fraud detection, regulatory reporting, and risk management, while potential applications of new tools for regulators include greater surveillance capacity and improved data collection and management. With these new tools come challenges and risks, notably operational risk. However, with appropriate implementation and safeguards, regtech and suptech may help improve the ability of a financial institution to meet regulatory demands in a cost-efficient manner and help regulators to analyze increasingly large and complex datasets.
Keywords: Europe, EU, Banking, Securities, Insurance, Fintech, Regtech, Suptech, Operational Risk, ESMA
Previous ArticleECB Updates List of Supervised Entities in EU in July 2019
ECB Finds Banks Unprepared for Pillar 3 Climate Risk Disclosures
The European Central Bank (ECB) published results of the 2022 supervisory assessment of climate-related and environmental risk disclosures among significant institutions (103) and a selected number of less significant institutions (28).
NCUA Assesses Credit Union Exposure to Climate-Related Physical Risks
The National Credit Union Administration (NCUA) released a Research Note that examines the exposure of credit unions to climate-related physical risks. In a related development
EBA Issues Multiple Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) is seeking comments, until July 31, 2023, on the draft Guidelines on the proposed common approach to the resubmission of historical data under the EBA reporting framework.
EC Adopts Regulation on Own Funds, Issues Other Updates
The European Commission adopted Delegated Regulations on own funds and eligible liabilities, on requirements for the internal methodology under the internal default risk model
CDP Platform to Report Plastic-Related Impact, Issues Other Updates
The Carbon Disclosure Project (CDP) announced that its global environmental disclosure platform has enabled reporting on plastic-related impact for nearly 7,000 companies worldwide
IASB to Enhance Reporting of Climate Risks, Proposes IFRS 9 Amendments
The International Accounting Standards Board (IASB) updated its work plan to enhance the reporting of climate-related risks in the financial statements,
BIS Addresses Data Gaps and Macro-Prudential Policy for Climate Risks
The Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) published a brief paper that examines challenges associated with the use of macro-prudential policies to address climate-related financial risks.
FCA Sets Out Business Plan, Launches TechSprint on Greenwashing
The Financial Conduct Authority (FCA) published its business plan for 2023-24. The plan sets out details of the work planned for the next 12 months to achieve better outcomes for consumers and markets
UK Committee Sets Out Recommendations for Next Phase of Open Banking
The Joint Regulatory Oversight Committee (JROC), comprising the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) as co-chairs and the HM Treasury and the Competition and Markets Authority (CMA) as members
ECB Publishes Multiple Regulatory Updates for Banking Institutions
The European Central Bank (ECB) published the results of the 2022 climate risk stress test of the Eurosystem balance sheet,