This new era of data abundance and mass adoption of digitally native financial products has intensified existing risks and introduced new ones, widening the gap between financial authorities’ duty of oversight and their ability to fulfil their mandate. While supervisors have been trying to catch up with the market for a long time, the increasingly fast pace with which innovative technologies are being implemented and used in the financial sector highlighted just how insufficient the supervisory tools and processes were.
This revelation intensified the need to digitally transform supervisory agencies and deploy modern supervisory technologies (suptech) so they can access more granular, diverse, timely and trustworthy data that improves operational efficiency and generates previously unattainable insights, thus improving decision-making. In the last two months, we have finally seen the winds of suptech innovation pick up, with a number of financial authorities taking steps to develop new capabilities, upgrade IT systems and adopt artificial intelligence to further their analytical capabilities.
The Bank for International Settlements (BIS) Innovation Hub and the Monetary Authority of Singapore have released a prototype that integrates regulatory data and analytics called Project Ellipse, the Otoritas Jasa Keuangan (Indonesian Financial Services Authority, OJK) launched a new data platform to better monitor the financial sector, the Bank of Ghana deployed a chatbot and complaints processing facility, the New York State Department of Financial Service is recruiting a Chief Technology Officer and Chief Data Officer, and the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, BSP) has announced it will be implementing ‘a unified regtech and suptech solution that will streamline and automate regulatory supervision, reporting, and compliance assessment of cybersecurity risk management for our supervised institutions’ called Advanced SupTech Engine for Risk-Based Compliance (ASTERisC*).
Suptech is quickly climbing to the top of the government’s priority agenda. If it is true that a public budget is the most truthful statement of an administration’s priority, then the budgetary section of the European Central Bank 2021 Report on supervisory activities is indicative of the increasing pace and magnitude of this suptech transformation: ‘The 7.9% increase in expenditure compared with 2020 mainly reflects the onboarding of new IT systems dedicated to banking supervision. […] With respect to the developments in IT systems, the increases in expenditure seen in the policy, advisory and regulatory functions [16.1%] as well as macroprudential tasks [80.6%] relate to the SSM information management system (IMAS) and the Stress Test Account Reporting platform (STAR). The main increase in expenditure in the Supervisory Board, secretariat and supervisory law section [43%] resulted from significant investment in 2021 in supervisory technologies (suptech), which exploit the potential of artificial intelligence and other pioneering suptech in the context of banking supervision, for internal and external stakeholders.’
A programme to train and empower teams of innovation leaders
To invest strategically in new systems and applications, take advantage of the opportunities offered by new technologies and constantly innovate to keep up with the continually evolving digital economy, public agencies must undergo a deep transformation. Financial authorities need to renew legacy IT systems and develop new capabilities in data science and technology, as well as reshape their culture and processes (for example, obsolete procurement rules), building an environment conducive to collaboration, creativity and innovation. These organisations will need modern leadership to guide them on this journey.
Starting in October 2022, the Cambridge SupTech Lab Innovation Leadership Programme is aimed at supervisors, regulators, economists, data scientists and technologists working in financial supervisory authorities and who are committed to leading innovation in their agencies and digitally transforming financial supervision. We invite agencies to enrol teams of senior and mid-career experts in our Programme. Through the Programme, they’ll have access to world-class online leadership education, ground-breaking research, new analytical frameworks, and innovative digital tools for market intelligence and business analysis. They’ll also develop the skills to manage the development of innovative products end-to-end, and build and deploy cutting-edge suptech applications. Over the nine-week course, participants will develop a holistic view of financial technologies, the opportunities they provide and the risks they bring. Through an immersive online experience that draws on real-world case studies, they’ll deepen their understanding of technology and data science, and learn about the many dimensions of digital transformation and product lifecycle management – from human-centred design to agile prototyping. They’ll experience design sprints, conduct suptech diagnostics and create proofs of concept for new applications that their agencies may well develop and deploy through the Programme.
Through a successfully developed and tested process, we will accelerate cutting-edge, globally scalable, production-grade suptech applications to transform financial supervision by running global competitions to find suitable technology vendors to partner with, de-risking and speeding up procurement, and conducting agile prototyping and security tests on the applications. For more information, please visit www.cambridgesuptechlab.org.