In the SupTech Loop #15

Hi Suptech Community,  

Welcome to the 15th issue of the Cambridge SupTech Lab bi-weekly LinkedIn newsletter, a source for updates on recent innovations, breakthroughs, opportunities, upcoming events in the suptech field, and 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.

This edition includes news from the Bank for International Settlements – BIS, Regnology, European Banking Authority (EBA), Financial Stability Board (FSB), International Monetary Fund, Monetary Authority of Singapore (MAS), Central Banking, Global Government Fintech, and others.

Suptech Innovations

The Bank of International Settlements (BIS) and European central banks are developing proofs of concept to explore the macroeconomic relevance of crypto-asset markets and DeFi. BIS and some partners within the Eurosystem, De Nederlandsche Bank and the Deutsche Bundesbank, are creating a data platform in an initiative dubbed Project Atlas. This project combines on- and off-chain information, creating a layered approach to data vetting and tailored statistics for central banks. A first proof of concept was developed focusing on international flows of crypto-assets. Read more here.

Inter-American Development Bank (IDB) and BIS join forces to foster innovation and financial inclusion in Latin America and the Caribbean. The two institutions are exploring and developing technology that can help to modernise the region’s financial systems. The first initiative resulting from this collaboration is Project FuSSE (Fully Scalable Settlement Engine, pronounced as “fyooz”), which offers open-source technology among central banks to facilitate the implementation of payment systems and other settlement infrastructures. Read more here.

Central Banking & Technology

• • Regnology and FNA partner to deliver an end-to-end Suptech solution. Regnology, a software provider specialising in regulatory reporting solutions, announced a partnership with FNA, a network analytics provider. The goal of this collaboration is to enhance the Regnology Supervisory Hub (RSH) by integrating advanced network analytics and simulations. The partnership enables regulators to receive a complete, end-to-end solution, from granular data collection to advanced and comprehensive analytics. Read more here.
  • Britain’s Financial Conduct Authority (FCA) confirms anti-greenwashing guidance. Ahead of the anti-greenwashing rule coming into force on 31 May, the FCA is supporting the industry with guidance to help them meet the standard. The new rule is designed to protect consumers by ensuring sustainable products and services they are sold to are accurately described. The FCA is also consulting on extending to portfolio managers the requirements for labelling and explaining sustainable investments, making consumer choice easier. Read more here.
  • Central bank digital currencies (CBDCs) could contribute to financial instability, a Federal Reserve working paper finds. A CBDC’s safer asset status, relative to private liabilities of the financial sector, may increase the financial sector’s vulnerability to destabilising runs in times of stress, the authors say. A CBDC may also weaken financial stability by reducing the ability of banks to extend credit during times of stress and competition with private stablecoins may affect financial stability. Read more here.
  • The Monetary Authority of Singapore (MAS), Mastercard partner to enhance cyber resilience in Singapore. The MAS and Mastercard have signed a memorandum of understanding to strengthen cybersecurity within Singapore’s financial services sector. Through this strategic partnership, the two entities aim to engage in bilateral information sharing, joint analysis of cyber threats, and competency-building activities. These initiatives intend to elevate cyber situational awareness, generate actionable insights and enhance financial institutions’ capability to effectively combat cyber threats. Read more here.
  • BIS General Manager advances vision for future tokenised financial system. In a speech, at the Peterson Institute for International Economics event, Agustín Carstens presented a working paper by him and Nandan Nilekani, co-founder of tech giant Infosys, which sets out their vision for the ‘Finternet,’ a network of unified ledgers connected by interledger protocols. Read more here.
  • Financial Stability Board (FSB) Asia addresses cross-border payments, artificial intelligence (AI) and climate change. The FSB Regional Consultative Group for Asia (RCG Asia) convened in Colombo, Sri Lanka and discussed recent financial market developments and vulnerabilities that warranted closer monitoring. An update on FSB’s agenda was provided, with a spotlight on enhancing regulatory frameworks for crypto-assets and navigating the growing influence of AI in finance. Members also reviewed progress in addressing climate-related financial risks within the region and deliberated on the challenges hindering the efficiency of cross-border payments. Read more here.
  • G20 TechSprint 2024 – Technology for the Planet. The BIS and the Banco Central do Brasil (BCB) have launched the fifth edition of the G20 TechSprint Initiative, with a focus on developing solutions for sustainable finance to support sustainable development goals (SDGs). There are three problem statements targeting the development of solutions on environmental, social and governance (ESG) data reporting and compliance, overcoming the barriers to scaling nature-based solutions, and accelerating progress towards SDGs. Developers worldwide are invited to submit their proposals by 31^st May 2024. Read more here.
  • United Kingdom financial authorities consult on Digital Securities Sandbox (DSS). The Bank of England (BoE) and the Financial Conduct Authority (FCA) have released a consultation paper on the DSS. The DSS is a regime that will allow firms to use developing technology, such as distributed ledger technology (DLT), in the issuance, trading and settlement of securities such as shares and bonds. The closing date for responses to the paper is 29^th May 2024. The BoE and the FCA will then review the responses and “the final guidance and rules will be published and the DSS will open for applications over the summer of 2024. Read more here.
  • Basel Committee consults on guidelines for counterparty credit risk management. The Basel Committee on Banking Supervision has launched a consultation on guidelines to help financial institutions manage counterparty credit risk and curb “long-standing industry weaknesses.” The proposed guidelines will replace the Committee’s Sound practices for banks’ interactions with highly leveraged institutions published in January 1999. The Committee welcomes comments from a broad range of interested stakeholders, to be submitted by 28 August 2024. Read more here.
  • Bank of Israel to launch CBDC sandbox. The regulator is continuing its explorations into the possibility of a CBDC by launching a sandbox for the private sector to develop ‘innovative use-cases.’ The authority is building an application programming interface (API)-based sandbox, and it will invite banks and fintech companies, among others, to develop use cases that will help design the digital shekel system. Read more here.
  • Heightened geopolitical instability, reliance on digital solutions raising the stakes linked to cyber security, European authorities warn. The three European Supervisory Authorities (European Banking Authority – EBA, European Insurance and Occupational Pensions Authority – EIOPA, and European Securities and Markets Authority – ESMA) have issued their Spring 2024 Joint Committee update on risks and vulnerabilities in the EU financial system. The risk update shows that risks remain elevated in the context of slowing growth, an uncertain interest rate environment and ongoing geopolitical tensions. Due to the heightened geopolitical instability and reliance on digital solutions, the number of attacks and cyber threats are also increasing, and while the impact of these attacks so far has been limited, cyber-related insurance claims keep increasing. Read more here.
  • Digital token identifier (DTI) to monitor crypto-derivative risk across G20. The DTI Foundation (DTIF), a division of Etrading Software, has announced that its DTI will be deployed for the regulatory reporting of digital asset derivative trades across the G20. DTIF’s scope is broadening to provide public authorities with greater support in identifying digital asset risks globally, and to instil further transparency in the crypto derivative trading market. Until now, derivatives reporting has focused solely on traditional financial instruments. Read more here.
  • Technical note: Kazakhstan’s proactive approach to the cryptocurrency sector. Kazakhstan experienced a significant rise in crypto mining in 2021 following a ban on mining in China. Volatility in crypto markets and energy shortages, coupled with a prohibition on the circulation of crypto assets in Kazakhstan, reduced the size of the market by the following year. Although not a regulatory priority, the broad prohibition on crypto assets should be replaced by a robust regulatory framework, contingent on market growth, upskilling supervisors, and a globally coordinated move to implementing conduct and prudential regulation. Read more here.

Events

• • Cambridge Suptech Lab, Arab Monetary Fund (AMF) to host Suptech Workshop during the Eleventh Meeting for the Arab Regional Fintech Working Group. The Lab, in conjunction with the AMF, have organised a workshop on “Formulation of Effective Suptech Frameworks” on 7th May 2024 following the Eleventh Meeting for the Arab Regional Fintech WG taking place on 5th and 6th May 2024. Both events will take place within the Dubai FinTech Summit at Madinat Jumeirah, Dubai. The workshop targets staff from regulatory and supervisory authorities and aims to help them understand the opportunities and challenges of suptech adoption as well as how to develop an effective suptech strategy. The Cambridge Suptech Lab will be presenting an overview of the State of Suptech 2023 report and discussing “Technology application design and prototyping” during the workshop. Read more here.
  • 2024 Annual ECB Banking Supervision Research Conference. This significant event, organised by the European Central Bank (ECB), will take place in Frankfurt am Main on 11^th and 12^th June 2024. The theme of the conference is “The European Single Supervisory Mechanism at 10: Lessons learnt and challenges ahead.” Topics such as Cyber Risk, Digital Currency and Banking Regulation, and Supervisory effectiveness touching on suptech, will be covered. Read more here.
  • Risk-based Supervision training by the International Monetary Fund (IMF). The International Monetary and Capital Markets Department of the IMF will host an in-person training for Mid-level bank supervisors in Kuwait between 2^nd and 6^th June 2024 on the fundamentals and goals of risk-based supervision (RBS), its challenges, and factors central to its success. Read more here.
  • New York R Conference. The event, which will be celebrating the 10-year anniversary of the conference, will take place on 16^th and 17^th May 2024 with interactive workshops on May 15^th 2024. The conference will feature several speakers who will be sharing their expertise on a wide range of topics, including data visualisation, machine learning, programming, AI, and more. The interactive workshops will sharpen participants’ skills in “Machine Learning and Causal Inference in R” as well as “Exploratory Data Analysis”. Read more and register here.
  • BIS Innovation Summit 2024: Navigating rapid innovation. The BIS is holding a virtual and in-person innovation summit from 6^th to 8^th May 2024 in Basel, Switzerland. The event brings together global policymakers, senior executives from the financial and technology industries, and academics to discuss how technological innovation’s intensified speed is offering increasing opportunities to the financial sector and to central banks, and how central banks are dealing with the risks that technological innovations may create. Read more here.

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