Hi Suptech Community,
Welcome to the 17th 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 email our global community of supervisors, data scientists, vendors, and suptech experts to share event invites, news, or new courses—subscribe here.
This edition includes news from the Bank for International Settlements – BIS, European Central Bank (ECB), Toronto Centre, The World Bank, Monetary Authority of Singapore (MAS), European Data Protection Supervisor (EDPS), Global Government Fintech, Reserve Bank of India (RBI), Bank of England, Alliance for Financial Inclusion (AFI), Proto, and others.
Suptech Innovations
Intelligible Solutions partners with Proto AICX for digital transformation in government and enterprise sectors. Intelligible Solutions, a global digital solutions provider for government and enterprise clients, has partnered with Proto AICX. This collaboration will allow Intelligible Solutions to leverage Proto’s AICX Platform, integrating automated multilingual chat into its user-centric software, apps, and products. The new partnership will leverage Proto’s generative AI platform which combines 15+ GPT features with Proto’s proprietary ProtoAI engine for better intent classification in local languages. Read more here.
Central Banking & Technology
Bank for International Settlements (BIS) survey highlights the importance of active collaboration and ecosystem-building in fostering a diverse suptech ecosystem. In the summer of 2023, the BIS surveyed 50 financial authorities to better understand the current levels and focus of suptech activity and the appetite for collaboration among institutions. The survey found that financial authorities have implemented various solutions and made organisational changes to add resources and coordinate suptech development across the organisation. The ongoing suptech initiatives focus on four broad areas: data visualisation, regulatory reporting, financial risk assessment and supervisory automation. While private sector providers are emerging, challenges regarding limited visibility of authority needs and complex procurement processes remain. Collaboration and ecosystem-building, supported by transparency and simplified processes, could address inefficiencies. Exploratory projects should foster public-private collaboration, leveraging common data pipelines for innovation and investment stimulation. Read more here.
Bank of England (BoE) publishes findings on point-of-sale (POS) testing for digital pound payments. The report details how existing POS terminals in the UK could, in principle, be used to initiate digital pound payments and that those terminals do not appear to require modification to do so. The experiment also found that it is technically feasible to implement offline payment functionality at points of sale using existing POS terminals, but this functionality might require that an offline payment application be deployed to those terminals to store offline balances. Read more here.
Reserve Bank of India (RBI) releases final framework for Self-Regulatory Organisations in the fintech sector (SRO-FT). The RBI, which invited feedback for a draft framework in January 2024, has finalized the SRO-FT framework, emphasizing the need for self-regulation to address concerns such as customer protection, data privacy, and cyber security in the rapidly evolving fintech landscape. The framework outlines eligibility criteria for entities seeking recognition as an SRO-FT, delineates their functions and responsibilities, and underscores the importance of governance in ensuring the effectiveness of the SRO-FT. Read more here.
European Central Bank (ECB) consults on outsourcing cloud services. The ECB has launched a public consultation on its new Guide concerning outsourcing cloud services to cloud service providers. This guide aims to clarify the ECB’s interpretation of relevant legal requirements and its expectations for the banks under its supervision. The public consultation ends on 15th July 2024. The ECB will subsequently publish the comments received, together with a feedback statement and the final Guide. Read more here.
World Bank issues first international CHF digital bond. The World Bank has priced the first Swiss franc-denominated digital bond issued by an international entity. It will be settled using Swiss franc wholesale central bank digital currency (wCBDC) provided by the Swiss National Bank. This 7-year CHF 200 million digital bond, the largest World Bank CHF bond issuance since 2009, uses Distributed Ledger Technology (DLT) and advances the digitalization of capital markets. Read more here.
Most financial authorities have already adopted or plan to adopt generative artificial intelligence (gen AI) tools in the context of cyber security. Utilizing data from a distinctive survey among cyber security experts at major central banks, the BIS explored the implications of gen AI for bolstering central banks’ cyber security infrastructure while addressing emerging risks. Findings reveal that many central banks have already embraced (71%) or planned (26%) to incorporate gen AI tools into their operations, driven by perceived benefits that outweigh potential drawbacks. To mitigate risks and harness the benefits of gen AI, central banks anticipate a need for substantial investments in human capital, especially in staff with expertise in both cyber security and AI programming. Read more here.
Citi and Morgan Stanley are at the forefront of open-source initiatives to tackle ‘common challenges’ in AI. The initiative, dubbed the AI Readiness for Financial Services Industry Special Interest Group (SIG), was launched through the Fintech Open Source Foundation (FINOS) to facilitate the deployment of gen AI across financial institutions. Key players in this effort include Citi, Morgan Stanley, Scott Logic, and ControlPlane, with Databricks serving as an executive sponsor. Other participating organizations include the London Stock Exchange Group, Publicis Sapient, EPAM, Microsoft, and Provectus. Read more here.
European Data Protection Supervisor (EDPS) hatches plan for AI. The EDPS has developed a comprehensive plan for AI in the European union (EU) institutions, focusing on three key components: governance, risk management, and supervision. While AI is not new, the recent proliferation of AI tools has made them multi-disciplinary, extending beyond the IT departments of EU institutions. Overall, the EDPS’s plan seeks to strike a balance between harnessing AI’s potential and safeguarding against its risks within the EU institutions: Read more here.
European Union (EU) nations rally behind ‘EUROPEUM’ initiative to spearhead blockchain advancements in public services. The European Commission has decided to create the EUROPEUM-EDIC, a new legal entity established by a consortium of nine member states. The EUROPEUM-EDIC (European Digital Infrastructure Consortiums) aims to deepen cooperation on blockchain and Web3 technologies. Specifically, it will further deploy and expand the exploitation of the European Blockchain Services Infrastructure (EBSI) to deliver EU-wide cross-border services, particularly in the realm of public services. The goal is to reinforce trust and cyber resilience in compliance with EU regulations, including the newly adopted European Digital Identity framework. The EUROPEUM-EDIC will support cross-border cooperation between public authorities, promoting innovation and interoperability of decentralized technologies with other solutions. Read more here.
Singapore releases national risk assessment (NRA) on money laundering (ML) in environmental crimes. The NRA details the country’s significant threats and vulnerabilities and presents mitigation strategies for government agencies, financial institutions, and designated non-financial businesses and professionals (DNFBPs) to counter these risks. Read more here.
Fintech and digital financial services ecosystem data for supervision and market intelligence. This guideline note, produced by the Digital Financial Services Working Group (DFSWG) and its members, addresses the need for comprehensive data strategies in emerging and developing market economies, particularly in the context of the rapidly evolving fintech and DFS ecosystem. It aims to guide regulators and central banks in adopting ecosystem-based data collection approaches, offering practical insights and a standardized taxonomy for enhanced decision-making, supervision, and the pursuit of financial inclusion goals. Read more here.
Artificial intelligence, data and competition. This paper by the Organization for Economic Co-operation and Development (OECD) explores the recent advancements in AI, particularly gen AI, and its potential impact on various markets. While acknowledging the importance of maintaining competitive markets to ensure the benefits are widely felt, it discusses the evolving lifecycle of gen AI, highlighting three key stages: foundational model training, fine-tuning, and deployment. The paper identifies potential risks to competition in the gen AI domain, such as interconnections across the value chain and barriers to accessing crucial inputs like high-quality data and computational resources. It also outlines the actions taken by competition authorities and policymakers to monitor market developments and emphasizes the importance of cooperation in maintaining knowledge and expertise efficiently. Read more here.
Using the press to construct a new indicator of inflation perceptions in France. This paper applies Natural Language Processing (NLP) techniques to analyse a quasi-universe of newspaper articles for France, focusing on the period from 2004 to 2022. The goal is to measure inflation attention and perceptions by households and firms in the country. The indicator, constructed along the lines of a balance of opinions, is well correlated with actual HICP inflation. It also exhibits good forecasting properties for the European Commission survey on households’ inflation expectations and overall HICP inflation. Read more here.
Events
2024 Starling Insights Compendium launch event. Starling Insights is presenting two online events to coincide with the launch of their flagship annual report, the Compendium. The Americas, United Kingdom and Europe, Middle East, and Africa (EMEA) launch event will take place on 11th June 2024 and the Asia and Australasia event will take place on 12th June 2024. As in past years, the Compendium summarizes global trends in the governance and supervision of culture and conduct-related risks in the financial sector. The live launch events will cover key themes from the report and will feature presentations and discussions from their renowned contributors and specially invited guests. Cambridge Suptech Lab’s co-founder and co-head, Simone di Castri, will be sharing insights on what is unique about suptech, supervisors that are leading the way, the impediments to advancing innovation and how public-private partnerships are being used effectively, during “The SupTech Imperative” discussion. Read more and register here.
AMLEDS (Applied Machine Learning, Economics, and Data Science). This online seminar series, scheduled for 21st June 2024, brings together researchers, policymakers, and practitioners interested in the new generation of tools from data science, statistics, and computer science. The webinars explore how these tools can be applied and further developed in economics and related disciplines. The primary purpose of AMLEDS is to build a virtual community where experts can share insights and discuss cutting-edge research. Read more and register here.
Blended finance workshop: Barriers, opportunities, and implications for financial stability and supervision. This virtual international workshop, hosted by Toronto Centre, will take place between June 24th and 25th, 2024. The workshop aims to equip central bankers, supervisors, and regulators with the knowledge and tools to understand blended finance from a market development perspective. Read more and register here.
Members of the AFI unite to promote globally inclusive financial standards. The AFI recently convened its 19th Global Standards and Proportionality Working Group (GSPWG) meeting in Eswatini from 20th to 23rd May 2024. Co-hosted by the Central Bank of Eswatini and the Ministry of Finance, this gathering focused on making global financial standards proportionate without compromising safety. Members explored critical topics such as introducing global sustainable finance standards and the supervisory implications of developments in AI. They also discussed risks and opportunities related to technologies like virtual assets and AI. Additionally, strategies were shared to prevent money laundering and terrorism financing from negatively impacting financial inclusion. Read more here.
Joint EU-UK Financial Regulatory Forum (the forum). The second meeting of the Forum convened in Brussels on May 22, 2024, was co-chaired by the European Commission’s Director General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) and the HM Treasury (HMT) Director General for Financial Services. Discussions focused on six main areas: regulatory and market developments, banking and anti-money laundering, sustainable finance, capital markets, asset management, and digital finance and AI. Both sides emphasized the importance of regulatory cooperation to maintain financial stability and addressed ongoing geopolitical challenges. Both parties agreed to continue collaborating on these issues between meetings. Read more here.
6th suptech and use of data seminar. This event, organized by the European Insurance and Occupational Pensions Authority (EIOPA), occurred on 28th May 2024 in Frankfurt am Main, Germany. The seminar targeted National Competent Authorities (NCAs) and focused on supervisory technology (suptech) and data utilisation in the financial services sector. Cambridge Suptech Lab’s co-founder and co-head, Matt Grasser, and Senior Researcher, Samir Kiuhan-Vasquez, shared insights on suptech design and prototyping. They presented findings from the State of Suptech Report 2023 and then discussed a roadmap for suptech solutions from proof of concept to production. The Lab’s approach embraces agile principles making it well-suited for the dynamic and uncertain nature of suptech projects. Read more here.
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