In the SupTech Loop #12

Hi Suptech Community,  

Welcome to the 12th 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, Bank of Latvia, European Central Bank, Toronto Centre, The World Bank, National Bank of Rwanda (NBR), The People Events, Financial Conduct Authority (FCA), and others.

The 2023 State of SupTech Report is Live!

The Cambridge SupTech Lab has published its State of SupTech Report 2023, focusing on how the development and implementation of suptech is evolving across the globe, extracting insights from the information provided by 64 financial authorities from six continents, representing financial sector oversight for a significant population of approximatively 2 billion people.  The survey was conducted by the Lab between August and November 2023.

Key findings show a rapid evolution of financial supervision, with 81% of surveyed financial authorities indicating their involvement in various suptech initiatives, an increase from the 71% reported last year. However, our findings show that we are still at early stages of the journey, with much work still to be done. Foundational technologies of early suptech generations form the basis of most implementations. Descriptive analytics (83%), dashboards, on-premise relational databases, web portals (79%), and static reports (73.6%) persist in bolstering data quality, management, and overall efficiency in supervisory processes. But financial authorities are only beginning to explore next-gen technology such as Generative AI, with 7.6% of respondents reporting having incorporated it into their suptech solution. The greatest challenge for financial authorities in implementing suptech initiatives arise from a lack of adequately trained personnel possessing essential IT skills (69%) and data science capabilities (73%).

The report is complete with a SupTech Taxonomy, case studies, and more. Download it at Cambridge SupTech Lab | State of Suptech Report 2023 (ccaf.io)

Highlighted

• • Cyber security is the most pressing challenge central banks face. According to the Risk Management Benchmarks 2024 report released by Central Banking, cyber security tops the list of central banks’ risk concerns across all income categories, just as in the previous two years of benchmarking. Cyber risk is also seen as the fastest growing vulnerability. The second most significant risk for high income central banks is market risk while that of low-income authorities is fraud.

    “A recent cyber incident occurred at the Sweden’s Riksbank, where the central bank’s human resources and salary system experienced a ransomware attack on the third-party provider hosting it. The systems were restored more than two weeks later early February. Read more here.”

Suptech Innovations

• • International Finance Corporation (IFC) releases Malena, an AI-powered environmental, social and governance (ESG) analysis tool for emerging markets. The IFC has opened public access to MALENA, which uses over 15 years of emerging markets data and natural language processing to distill complex, unstructured ESG information into actionable insights for sustainable investments. The tool allows users to upload documents to the site and view outputs such as gender data, greenhouse gas emissions, and sentiment insights. Read more here.
  • National Bank of Rwanda (NBR) tapping innovation to foster financial inclusion. Rwanda has an ambitious financial inclusion agenda and also epitomizes a data-driven culture. As a result, there has been a need for accurate, high-frequency data to monitor financial inclusion progress. The NBR, in collaboration with various stakeholders, has pioneered innovative systems that monitor and foster financial inclusion, a move that saw the authority win the AFI Financial Inclusion Innovation Award last year. At the heart of this transformative journey is the Electronic Data Warehouse that automates and streamlines the reporting processes. Other innovations include Intumwa chatbot, Gereranya: A price comparator, Rwanda Integrated Payment Processing System and Savings and credit groups map. Read more here.

Research Spotlight

• • European Central Bank (ECB) publishes final revised guide to internal models. The ECB has updated the Guide to internal models, covering general topics, credit risk, market risk, and counterparty credit risk, after public consultation. The revisions to the Guide clarify how banks should go about including material climate-related and environmental risks in their models. They also outline how banks can revert to the standardised approach for calculating risk-weighted assets, which might help support banks’ efforts to simplify their internal model landscapes. Read more here.

Industry News

• • European Union enacts new verification requirements to combat greenwashing. The Internal Market and Environment committees have set out new regulations which require companies to undergo a verification process for their environmental assertions before publicising them. These directives are particularly vital in light of the rampant misleading environmental claims, with studies indicating that up to 50% of such claims are deceptive. Read more here.
  • European Union council and parliament reach provisional agreement to regulate environmental, social and governance (ESG) rating activities. Under the new rules, ESG rating providers will need to be authorised and supervised by the European Securities and Markets Authority (ESMA) and comply with transparency requirements, in particular with regard to their methodology and sources of information. The provisional political agreement is subject to approval by the Council and the Parliament before going through the formal adoption procedure. The regulation will start applying 18 months after its entry into force. Read more here.
  • Cambridge Centre for Alternative Finance (CCAF) launches digital money dashboard. The CCAF has unveiled the Cambridge Digital Money Dashboard, a groundbreaking open-access tool designed to illuminate the fast-evolving world of digital money, focusing initially on stablecoins. This innovative dashboard is your go-to source for near real-time data, interactive visualisations, and insights into the stablecoin market, which has seen explosive growth from less than $3 billion in 2019 to over $130 billion today. Read more here.
  • Australia advances artificial intelligence (AI) regulation with new expert panel, while the European Union nears adoption of AI Act. Australia has made a significant stride towards regulating AI by forming a panel of legal and scientific experts to advise on potential guardrails for the research, development, and use of AI. The goal is to ensure that AI systems are transparent, well-tested, and accountable. Meanwhile, the European Union (EU) has moved another step closer to the adoption of the AI Act. The provisional agreement on the Act was endorsed by members of the European Parliament (MEPs) at the committee level. Read more here.

Opportunities

• • CPMI and IOSCO publish discussion paper, call for comments on streamlining variation margin (VM) in centrally cleared markets. The Bank of International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are calling for comments on a new consultation paper touching on eight effective practices that address central counterparties’ (CCPs’) and clearing members’ VM processes and transparency. Responses on the report should be sent by 14 April 2024. Read more here.

Capacity Building & Education

• • Toronto Centre certified financial supervisor (CFS) level 1: Crisis preparedness programme. A week-long in-person programme, to be held between 25th and 31st May 2024 in Toronto, the CFS level 1 programme will provide an opportunity for supervisors to learn from Toronto Centre programme leaders, as well as to network and learn from their international peers whilst studying the key concepts and practices of crisis preparedness. At the end of the programme, participants will be able to examine the critical components of a crisis preparedness or contingency planning guide in the event of a financial crisis, in accordance with international best practices. Read more and register here.

2024 Cambridge SupTech Lab Programming

• • Sign up to be part of one of three programmes that provide career-enhancing professional development for public sector managers and specialists to lead the digital transformation of their organisations. Across our six-week, online programmes – SupTech Frontiers, Practical Data Science in Financial Supervision, and Product and Organisational Innovation – participants will use modern technologies to craft applications that automate lengthy manual processes, distill data into intelligence, collaboratively develop new analytical frameworks, and engage with top technology vendors, researchers, entrepreneurs, and more!

    Attendees will leave with cutting-edge technology evaluations, pragmatic diagnostic frameworks, data management blueprints, and a capstone project, as well as a certificate of completion from the Cambridge Judge Business School. They will also have the opportunity to be part of our Launchpad programme, taking their capstone projects to prototype development.

    If you are a supervisor, regulator, policymaker, economist, examiner, actuary, analyst, data scientist, or technologist within regulatory, supervisory, or policymaking authorities, visit Cambridge SupTech Lab | Capacity Building and Education (ccaf.io) to learn more and enroll!

In case you missed it…

• • • SupTech strategy and innovation – Bank of Latvia. In this video, Marine Krasovska, head of fintech supervision at Bank of Latvia, shares the bank’s experiences in developing and implementing a cutting-edge Suptech strategy aiming to transform regulatory bodies’ operations. She highlights the critical role of technology in enhancing regulatory work to make supervision processes more digital, efficient, and innovative. Watch the video here.

Upcoming Events

• • • Irving Fisher Committee on Central Bank Statistics (IFC) workshop “Addressing climate change data needs: the global debate and central banks’ contribution.” Organised by the Central Bank of the Republic of Türkiye with the support of the IFC, Bank of France and the Deutsche Bundesbank, the event will bring together experts from the public and private sector, as well as academia, to discuss the challenges and prospective solutions that can enhance climate resilience strategies, especially through bridging data gaps. The workshop is scheduled to take place in İzmir, Türkiye, from 6th to 7th May 2024, with participants having the option to attend in person or virtually. Read more here.
    • Data Science Week 2024. The People Events will be hosting a three-day world conference on data science and statistics (Data Science Week 2024), bringing together the most innovative minds, enterprise practitioners, technology providers, start-up innovators, academics and executives, working with data science, big data, machine learning, artificial intelligence, data management, data engineering, IoT and analytics. Held between 17th and 19th June 2024 in Amsterdam Netherlands, the event will focus on themes surrounding data governance, data literacy, and leadership, privacy and ethics, applications of machine learning, and open-source data technologies. Read more here.
    • Financial inclusion techsprint. Britain’s Financial Conduct Authority will be holding a 3-month cohort-based financial inclusion techsprint, designed to tackle challenges spanning not only access to financial services but also issues encountered throughout the consumer journey. The techsprint will run from 7th March to 30th May 2024. The FCA invites interested individuals to apply to participate as observers by 28th May 2024. Read more here.

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