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Welcome to the 18th 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 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), Banco de España, Monetary Authority of Singapore (MAS), European Banking Authority (EBA), Global Government Fintech, Reserve Bank of India (RBI), Bank of England, Bank of Lithuania , Central Bank of Ireland, Finextra, European Commission, Banque de France, Financial Conduct Authority (FCA), and others.
SupTech Innovations
Bank for International Settlements (BIS) and Monetary Authority of Singapore (MAS) conclude Project Viridis aimed at monitoring climate risks. The BIS Innovation Hub and MAS have developed a blueprint for a platform that integrates regulatory and climate data to help financial authorities identify, monitor and manage climate risks in the financial system. The blueprint outlines the key features and metrics required for a climate risk platform. These incorporate data and information on financed emissions, physical risk exposure and forward-looking assessments under different climate scenarios. The Viridis climate risk platform demonstrates how regulatory data can be integrated with climate data extracted from corporate disclosure documents using natural language processing techniques. Read more here.
Bank of Lithuania introduces a cutting-edge data system called REGATA, marking a significant shift in its operations. Banks operating in Lithuania have started providing supervisory information to REGATA, a next-generation technological platform designed to collect and process regulatory reporting information. This platform allows financial market participants to submit data through both the portal and application programming interfaces (APIs). REGATA was developed jointly by the Bank of Lithuania and vendor, Regnology. Read more here.
Central Banking & Technology
BIS launches Project Rialto to enhance instant cross-border payments through wholesale central bank digital currencies (wCBDC) settlement. Project Rialto aims to explore how instant cross-border payments could be improved using a modular foreign exchange (FX) component combined with settlement in wCBDC. Enhancing cross-border payments is an explicit international policy objective and a priority of the G20. Decentralised solutions, CBDC, and interlinked payment infrastructures are considered promising avenues for improving cross-border payments. Read more here.
A designated web portal for the European blockchain regulatory sandbox is live and features all relevant information for interested parties. Earlier in the year, the European Commission launched a regulatory sandbox for innovative use cases involving Distributed Ledger Technologies (DLT). The sandbox establishes a pan-European framework for regulatory dialogues to increase legal certainty for innovative blockchain solutions. Brickken, a Barcelona-based startup dealing in tokenising real-world assets, has recently announced its selection to participate in the sandbox. The sandbox runs from 2023 to 2026 and will annually support 20 projects, including public sector use cases on the European blockchain services infrastructure. Read more here.
Brazil’s CBDC strives to address challenges related to data privacy as pilot tests evolve. Like many central banks globally, Banco Central do Brasil (BCB) has been exploring the launch of a CBDC – which it has named ‘Drex’ – in collaboration with external partners, including major technology and payments companies. The central bank has issued an update on its development of a CBDC, stating that data-privacy challenges remain an ‘obstacle’ as it rolls the turf for a second phase of pilot tests. To broaden the discussion on use cases in the Pilot, the BCB, throughout the third quarter of 2024, will call on society to submit new proposals for participation in the Drex Pilot. Read more here.
The 2024 Financial Technology Forum’s (FTF) news technology innovation awards unveiled. The FTF news awards celebrate and recognize the professionals, financial technology vendors, service providers, industry bodies and regulators who have made significant strides and noteworthy achievements in operational excellence over the 2023 calendar year. Suptech vendor, Regnology, scooped two awards for the “Best Regulatory Reporting Solution” and “Best RegTech Solution” categories, concerning its Reporting Hub and Rcloud deployment platform respectively. Read more here.
Project mBridge reaches minimum viable product (MVP) stage and invites further international participation. This initiative, a result of extensive collaboration starting in 2021 between the BIS Innovation Hub and several financial authorities, has reached the MVP stage. The project seeks to investigate a shared multi-CBDC platform among participating central banks and commercial banks, utilizing distributed ledger technology (DLT) to facilitate immediate cross-border payments and settlements. Private sector participants are invited to propose value-added solutions that can be connected to the mBridge MVP platform. More central banks and commercial banks can join the platform through the mBridge MVP legal framework and perform real transactions on it. Read more
Peering through the hype – assessing suptech tools’ transition from experimentation to supervision. Inadequate resources – including unavailability of effective tools – affect supervisory authorities’ ability to act in a timely manner. Much hope is pinned on the promise of suptech in helping enhance supervisory ability. This paper by Jermy Prenio , principal advisor of the Financial Stability Institute, identifies factors that could contribute to achieving this outcome by examining authorities’ experiences in deploying suptech tools. Read more here.
Central Bank of Ireland (CBI) preps sandbox launch following ‘broadly positive’ feedback. The CBI has announced how its proposed ‘innovation sandbox programme’ will operate after ‘broadly positive’ feedback in a consultation that attracted responses from 27 organisations. The authority has announced that it will open applications for sandbox participants from July to September, with the inaugural sandbox cohort scheduled to commence between October and December. Read more here.
Bank of Ghana (BoG) partners with Singapore’s MAS in testing the use of digital currency for cross-border trade. The BoG in collaboration with the MAS has successfully completed the first proof of concept (POC) under Project DESFT (Digital Economy Semi-Fungible Token) which demonstrated the use of digital credentials for international trade and cross-border payment. Launched in June 2023 by the BoG and the private sector, Project DESFT aims to introduce solutions such as Universal Trusted Credentials (UTCs), CBDC, stablecoins, a trade marketplace, and an escrow arrangement, facilitating payments upon successful verification of digital credentials and trade fulfilment. Read more here.
Reserve Bank of India (RBI) launches global hackathon – HaRBInger 2024. The RBI is organising its third global hackathon – ‘HaRBInger 2024 – Innovation for Transformation’. The hackathon invites participants to develop solutions using technology and innovative approaches under the following themes and problem statements: “Zero Financial Frauds” aimed at enhancing the safety and security of digital transactions and combatting financial frauds; and “Being Divyang Friendly” which prioritizes inclusivity for persons with physical disabilities. Read more and register here.
European Banking Authority (EBA) unveils priorities on innovative applications for 2024/2025. In addition to EBA’s technical contributions to initiatives such as the digital Euro, and horizontal work including contributions to the joint-ESA European Forum for Innovation Facilitators and the EU Supervisory Digital Finance Academy, the authority has identified three priority areas. These include decentralised finance, crypto and tokenisation; artificial intelligence and machine learning; and value chain developments. There will be horizontal work on innovation monitoring, regtech/suptech and promoting cross-disciplinary discussions. Read more here.
Supervisors must adopt technology – European Central Bank’s (ECB’s) Elizabeth McCaul. Speaking at the Central Banking Summer Meetings in London, Elizabeth McCaul, Member of the Supervisory Board of the ECB, said that supervisors must leverage technology to effectively manage growing data volumes and new risks stemming from banks’ use of artificial intelligence or new business models. She said the financial sector had undergone “incredible evolution” and that new tools such as generative artificial intelligence were being tested, while new entrants were threatening to disintermediate traditional banks. Read more here.
RBI’s unified payment interface (UPI) to be extended to 20 countries. The RBI has said that it intends to extend its instant payments system to 20 countries in the next five years, with the project scheduled for completion by 2029. The financial authority will work with a subsidiary of the National Payments Corporation of India (NPCI), which operates retail payments and settlement systems. The RBI also plans to explore multilateral linkages and collaborative opportunities for the Fast Payment System (FPS) with regions such as the European Union and the South Asian Association for Regional Cooperation (SAARC). Read more here.
Banco de España’s (BdE’s) external evaluation of suptech’s role. This assessment – launched in 2023 – includes a critical review of the use of innovative technologies to improve the prudential supervision processes of credit institutions, with particular emphasis on the governance of technical and human development processes, alignment with BdE’s strategic digitalisation objectives, and coordination and interaction with the single supervisory mechanism (SSM) in the Suptech field. Read more here.
European commission consults on artificial intelligence in the financial sector. This targeted consultation, with a 13th September 2024 responding deadline, seeks to gather input from all financial services stakeholders including companies and consumer associations. The views from stakeholders will support the Commission services in their assessment of market developments and risks related to AI and in the implementation of the AI Act in the financial sector. The consultation is focused on the objectives of the financial sector acquis and the AI Act and is not intended to focus on other policy objectives such as competition policy. Read more here.
AI as a transformative force in financial supervision. Speaking in a seminar on financial regulation, Banque de France’s First Deputy Governor, Denis Beau, highlighted that AI is already one of the main drivers of the current digital transformation of the financial sector, and the development of GenAI should further accelerate this trend. AI can improve the efficiency of financial institutions if properly harnessed but also holds risks at the micro-prudential as well as the macro-prudential levels. Beau called for an effective regulatory framework in order to take full advantage of AI. Read more here.
Network for Greening the Financial System (NGFS) publishes second guide on climate-related disclosure for central banks. The guide builds on disclosure recommendations by the Task Force on Climate-Related Financial Disclosures (TCFD) and is aimed to central banks that are in the process of, or considering, disclosing their climate-related exposures. The report acknowledges that there is no one-size-fits-all solution and, as such, presents a range of disclosure options that central banks may choose to follow, depending on their specific circumstances. Read more here.
Central banks worldwide are actively exploring CBDCs. The recent 2023 BIS survey on central bank digital currencies and crypto has revealed that financial authorities are actively investigating CBDCs, with a notable increase in wholesale CBDC experiments and pilots in 2023 particularly in advanced economies, even though emerging and developing countries have stepped up their efforts as well. and varying approaches to design features and regulatory frameworks. Financial authorities are proceeding at their own speed, taking diverse approaches and considering different design features. Overall, the likelihood that central banks will issue a wholesale CBDC within the next six years now exceeds the likelihood that they will issue a retail CBDC. Read more here.
Events
“Exploring the frontier of central banking” innovation tour. This tour, scheduled for 1st July 2024 by the BIS, uncovers how the BIS Innovation Hub is pushing the technological boundaries of central banking and shaping the future of the financial system together with partners around the globe. Attendees can gain first-hand insight into BIS projects covering topics such as advanced data analytics, CBDC and tokenisation of financial instruments and learn more about central bank innovation in interactive ways. This event is part of the Point Zero Forum (PZF), a policy-technology dialogue taking place from 1st to 3rd July 2024 in Zurich, Switzerland. Read more and register here.
Finextra launches NextGenAI event. This new event, scheduled to take place in London on 26th November 2024, will dive into what regulations are coming in and what financial services can learn from other industries that are pioneering the use of artificial intelligence (AI). Themes will explore user experience, data, hyper-personalisation, risk profiling, explainability, human-in-the-loop, and operational resilience challenges. With a mixture of keynotes, panels, fireside chats, demos and workshops, NextGen: AI will help redefine what’s possible. Read more here.
Data Innovation for Future of Regulation (DIFoR) Conference. The Financial Conduct Authority (FCA) will be holding the second DIFoR Conference on 4th and 5th July 2024 at their offices in Stratford, London. This year, the conference will explore how central banks and regulators across the world are evolving in the digital era through three themes: Safety, Security and Stability. Read more and register here.
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