The Bank for International Settlements (BIS) published working papers and the Singapore Center of its Innovation Hub developed the prototype of a supervisory analytics platform, in collaboration with the Monetary Authority of Singapore (MAS).
The prototype supervisory analytics platform is named Project Ellipse, which explores how supervision could become insights-based and data-driven using an integrated regulatory data and analytics platform. The platform demonstrates how regulatory and other data, such as articles and news, can be integrated into a single platform to help regulatory authorities identify potential risks to banks and the banking system. It combines structured and unstructured sources of data in real time and uses advanced analytics to provide supervisors with early warning indicators, analytics, and prudential metrics for banking supervision. BIS will launch an Ellipse collaboration community (as a 12-month pilot program) to share, further test, customize, and scale this solution across regulatory authorities worldwide. The Ellipse prototype is the first to be published on BIS Open Tech, a new platform for sharing statistical and financial software as public goods, thereby promoting international cooperation and coordination. Entities that supported this project include the Bank of England (BoE), the International Swaps and Derivatives Association (ISDA), the Financial Network Analytics (FNA), and Accenture.
Two of the working papers BIS published in March demonstrate an investment strategy based on deconstructing environmental, social, and governance (ESG) scores and assess the gains from international macro-prudential policy coordination. The first paper demonstrates an investment strategy that focuses on specific underlying ESG categories such as emissions reduction and human rights. To implement the investment strategy, the authors exclude firms with the lowest scores in certain ESG categories of interest and implement a best-in-class investment strategy. This approach helps investors overcome the "aggregated confusion" inherent in ESG scores. Moreover, it enables investors to better track the sustainability performance trajectory of their portfolio against their stated sustainable investment objectives. The second paper finds that a countercyclical response in capital requirements induces a global bank to engage in regulatory arbitrage and discusses the broad policy implications of the analysis conducted. One of the conclusions of this analysis is that future research should also consider the possibility of leakages from regulated banks to non-regulated (shadow) financial intermediaries within jurisdictions.
- Press Release on Project Ellipse
- Project Ellipse (PDF)
- Open Tech Platform
- Paper on Deconstructing ESG Scores
- Paper on Cross-Border Macro-Prudential Policy
Keywords: International, Banking, ESG, Sustainable Finance, Climate Change Risk, Reporting, Basel, Macro-prudential Policy, Regulatory Capital, Project Ellipse, Digital Regulatory Reporting, Regtech, Suptech, BIS
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