In the SupTech Loop #10

Hi Suptech Community,  

Happy New Year, and welcome to the 10th issue of the Cambridge SupTech Lab bi-weekly LinkedIn newsletter, a source for updates on recent innovations, breakthroughs, opportunities, and upcoming events in the field of suptech, as well as news from the Cambridge SupTech Lab team.

If you would like to flag any items for inclusion in the next newsletter, please email us at cambridgesuptechlab@jbs.cam.ac.uk. Occasionally, we also connect with our global community of supervisors, data scientists, vendors, and suptech experts via email to share event invites, news, or new courses – subscribe here.

In this edition, news from Bank for International Settlements – BIS, Network for Greening the Financial System (NGFS), European Central Bank, Bank of England (BoE), The World Bank, Financial Conduct Authority (FCA), and others.

Highlighted

• • SupTech Week 2023 attracts 560 participants. The first edition of SupTech Week came to a close on 7th December 2023, drawing 560 participants from 60 over countries. Hosted by Cambridge SupTech Lab with content partners BIS Innovation Hub and the World Economic forum, SupTech Week attracted a diverse speaker line-up of over 87 distinguished leaders from financial authorities, regulated institutions, technology companies, and academia around the world. They discussed key trends, challenges, and opportunities in the financial supervision landscape covering topics such as the state of suptech, consumer protection, suptech-powered risk-based supervision,  the full suptech data journey, the ethic and regulation of artificial intelligence (AI), buy versus build options in developing suptech solutions, gender-disaggregated supervisory data, green finance and embedding innovation and collaboration across the suptech ecosystem.

• • • SupTech Week takeaways include:
      • Suptech is rising, with supervisory agencies making strategic investments in technology and talent.
      • Collaboration, collaboration, collaboration is key.
      • The need for granular data is more important than ever, as well as a seamless flow of data between supervisors and supervised entities.
      • AI needs a “human in the loop” to mitigate potential risks.
      • Regtech and suptech have more commonalities than differences – “Two sides of the same coin.’
      • Consumer protection is akin to a human right and is everyone’s responsibility.
      • Suptech is a critical tool in helping law enforcement and authorities prevent money laundering, weapons proliferation, and other financial crime.
      • Mitigating climate risk requires identifying how those risks present themselves in the financial sector.
      • There is both a need and an opportunity to collecting more granular sex-disaggregated data.

Suptech Innovations

• • • Cambridge SupTech Lab facilitates working prototypes for consumer protection supervision. The 2023 SupTech Launchpad by the Cambridge SupTech Lab has facilitated co-creation of three working prototypes that leverage advanced technology to expand consumer protection. The prototypes include:

      • A financial consumer protection suite with web scraper and ML-based analysis for the Bangko Sentral ng Pilipinas (BSP) and Philippines Securities and Exchange Commission (SEC)
      • A next-generation, AI-powered, chatbot supported, complaints management system for the Bank of Ghana (BOG) and the Indonesian Financial Services Authority (OJK)
      • A platform for financial market monitoring via social media and web extraction for theSuperintendencia de Banca, Seguros Y AFP Peru (SBS)

      Read more here.

Research Spotlight

• • • Project Tourbillon explores anonymity for digital payments. Developed by the Bank for International Settlements (BIS) Innovation Hub Swiss Centre, Project Tourbillon demonstrates a new privacy paradigm for retail central bank digital currencies (CBDC). The experiment proposes a concept of payer anonymity, providing cash-like anonymity to the payer. The project also explores security (by implementing quantum-safe cryptography) and scalability (by testing the prototype’s ability to handle a growing number of transactions using payment data) and their trade-offs in a retail CBDC design. Read more here.
    • Network for Greening the Financial System (NGFS) publishes technical documents providing recommendations for the development of nature-related scenarios and scaling up blended finance in Emerging Market and Developing countries (EMDEs). The recommendations on nature-related scenarios are built on an extensive literature review, with inputs from a group of external experts. The Technical Document lays the groundwork for future development of nature-related scenarios. The document on blended finance, identifies recommendations aimed at addressing key barriers to scaling blended finance in EMDEs, and showcases demonstrative projects from various EMDEs that have successfully crowded in private capital into climate financing projects. Read more on nature-related scenarios here and on bended finance here.

Industry News

• • • COP28 UAE Techsprint winners revealed. The Bank for International Settlements (BIS), the COP28 Presidency and the Central Bank of the United Arab Emirates (CBUAE) announced the winners of the COP28 UAE TechSprint during an award ceremony ceremony at the 2023 United Nations Climate Change Conference in Dubai. Fifteen shortlisted teams from around the world were invited to develop innovative technological solutions to scale sustainable finance. Solutions applied artificial intelligence, blockchain, internet of things and sensor technologies. Read more here.
    • European Central Banks (ECB) prioritises IT outsourcing and cyber resilience risk supervision. Deficiencies in IT outsourcing and cyber resilience have been identified as a key vulnerability to be addressed by ECB Banking Supervision as a supervisory priority in the period 2022-24. IT security remains a concern for supervisors and significant institutions alike. This concern is exacerbated by findings from several on-site inspections on cyber security over the last few years, which showed weaknesses in IT asset management, deficiencies in asset protection, limited incident detection capabilities, and limited cyber incident response and recovery preparedness. Read more here.
    • Bank of England (BoE) to review artificial intelligence (AI) risk to financial stability. While most firms claim that the way they were using the AI technology was “relatively low risk”, the bank’s Financial Policy Committee warned that wider adoption “could pose system-wide financial stability risks”. That could mean greater “herding behaviour”, where there is a concentration of firms making similar financial decisions that then skews markets, and an increase in cyber risks. Read more here.
    • Bank of International Settlements (BIS), World Bank and International Monetary Fund (IMF) to collaborate on tokenisation project. The three institutions are set to work together for the first time to “tokenise” some of the financial instruments that underpin their global work. The project will initially focus on digitising promissory notes, with Switzerland’s central bank also participating. Read more here.

Opportunities

• • • Basel Committee consults on interest rate risk in the banking book and cryptoasset standards. The Basel Committee on Banking Supervision has issued a public consultation on proposed adjustments to its standard on interest rate risk in the banking book (IRRBB) and on banks’ exposures to cryptoassets. The Committee welcomes comments on the proposed amendments to the IRRBB and cryptoasset standards, which should be submitted by 28 March 2024. Read more on the IRRBB consultation here and on the proposed cryptoasset standard amendments here.
    • Britain’s conduct regulator sets out greenwashing rules. The Financial Conduct Authority (FCA) has moved to clamp down on greenwashing by setting out sustainability disclosure requirements and an investment labels regime. The authority is consulting on the new guidance on the expectations for FCA-authorised firms making claims about the sustainability of a product or service and welcomes comments by 26 January 2024. Read more here.
    • Basel Committee on Banking Supervision consults on pillar 3 disclosure framework for climate-related financial risk. The committee is seeking the views of stakeholders on its preliminary proposal for qualitative and quantitative Pillar 3 disclosure requirements that would complement the work of other standard setters, including the International Sustainability Standards Board (ISSB), and provide a common disclosure baseline for internationally active banks. They invite submissions on the proposals, which should be submitted by 29 February 2024. Read more here.

Capacity Building & Education

• • • Cambridge SupTech Lab – Three 6-week online programs to shape leadership and transformation. Training continues to emerge as the topmost area of support sought on suptech. Offering a blend of interactive and integrated learning techniques, the Lab delivers world-class online leadership education and experiential training that empower public sector leaders to deliver more inclusive, resilient, transparent and sustainable economies and financial markets through the development, adoption and implementation of cutting-edge suptech-applications. We are committed to advancing the development of suptech ecosystems through creating a skilled and empowered workforce. Join us for our 2024 cohorts.
      • 1st cohorts:
        • Supervisor of the Future – SupTech Frontiers: 8 April to 17 May
        • Distilling The Digital Oceans – Practical Data Science in Financial Supervision: 8 April to 17 May
        • Leading Transformation – Product and Organizational Innovation: 3 June to 12 July
      • 2nd cohorts:
        • Supervisor of the Future – SupTech Frontiers: 22 July to 31 August
        • Distilling The Digital Oceans – Practical Data Science in Financial Supervision: 9 September to 18 October
        • Leading Transformation – Product and Organizational Innovation: 4 November to 13 December

In case you missed it…

• • • Climate-related scenarios for financial stability assessment: An application to France. This publication proposes an analytical framework to quantify the impacts of climate policy and transition narratives on economic and financial variables necessary for financial risk assessment. Focusing on transition risks, the scenarios considered include unexpected increases in carbon prices and productivity shocks to reflect disorderly transition processes. Read more here.

Upcoming Events

• • • 2024 Women Leadership Program 1.0. Toronto Centre will be hosting a leadership program for women supervisors and regulators, targeting the Sub-Saharan region, between 19th February and 17th March 2024. The program is designed for current and aspiring women leaders seeking to develop and strengthen their key behavioural competencies and leadership skills. The event will cover several topics including emotional intelligence and coaching, team management, women empowerment, gender equality, women’s financial inclusion, and action learning. Read more and register here.

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