Hi SupTech Community,
Welcome to the 24th 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, Bank of Mauritius, Bank of Spain, Central Banking, Currency Research,European Central Bank, Financial Conduct Authority , Finextra, Global Government Fintech, Monetary Authority of Singapore (MAS), Network for Greening the Financial System (NGFS), Financial Markets Authority – New Zealand, OECD – OCDE, Saudi Central Bank – SAMA and others.
Suptech Innovations
Private sector partners join the Bank for International Settlements (BIS) project Agora to explore the tokenisation of wholesale cross-border payments. More than 40 private sector financial firms, convened by the Institute of International Finance, will join the BIS and a group of leading central banks in Project Agorá to explore how tokenisation can enhance wholesale cross-border payments. The project builds on the unified ledger concept proposed by the BIS, focusing on how tokenised commercial bank deposits can be seamlessly integrated with tokenised wholesale central bank money in a public-private programmable core financial platform. Read more here.
Natural language processing solution developed by the European Central Bank (ECB), DELPHI. Intelligent Search solution, Delphi, is a suptech tool based on textual analysis that generates insights from news articles and relates them with quantitative information on investor sentiment from the ECB. This helps the ECB make informed decisions by better understanding market dynamics and investor behaviour. The tool training must be done with real data to obtain satisfactory results. The solution is part of the ECB’s broader efforts to integrate artificial intelligence (AI) and machine learning into its operations. Read more here.
Banks in Singapore to roll out Singpass Face Verification (SFV) to strengthen resilience against phishing scams. The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) have announced that major retail banks in Singapore will progressively implement the SFV over the next three months to strengthen the digital token (DT) setup process for retail banking customers. SFV will be triggered in higher-risk scenarios to strengthen and complement existing authentication methods for DT setup. .
Central Banking & Technology
Central banks, BIS and the Network for Greening the Financial System (NGFS) build resources for climate risk data. Leveraging insights from the initial directory, the NGFS Data Directory 2.0 is being crafted as a groundbreaking platform to significantly improve the accessibility and utilization of climate risk data in the financial sector. This initiative is a collaborative effort involving the BIS Innovation Hub Singapore Centre, the Monetary Authority of Singapore, the Bank of France, and the NGFS. Key features of the upcoming 2.0 platform include a collaborative data ecosystem, advanced search and analytics, user-centric design and enhanced data integration. Read more here.
Banque de France governor proposes European Union distributed-ledger technology (DLT)-based unified ledger. At an EU policy-focused conference in Brussels, Governor François Villeroy de Galhau proposed a regional outlook for tokenization based on DLT. Villeroy urged exploration into a new public-private infrastructure built around a distributed ledger, including a wholesale central bank digital currency (CBDC), tokenised commercial bank money and tokenised financial instruments, and potentially the digital euro later. This shared infrastructure would streamline transactions and reduce risks and costs while preserving the two-tier financial system. Read more here.
Central banks have a duty to innovate and build technology – Cecilia Skingsley, Head of the BIS Innovation Hub. Speaking at the opening of the Bank of Mauritius Innovation Hub, Skingsley underscored the crucial role of innovation in reshaping the financial landscape. She stressed that central banks must adapt to rapid technological changes to meet evolving societal needs, citing advancements like QR codes and artificial intelligence that enhance payment efficiency and accessibility. However, she noted ongoing challenges like slow transaction times and limited banking access. Skingsley emphasized the importance of innovation hubs for collaboration between central banks and the private sector. Read more here.
Bank of Mauritius launches ‘Innovation Hub’ to foster fintech development. Dubbed the Innov8, the Hub will bring together a diverse range of stakeholders, including entrepreneurs, industry experts, technology providers, regulators, academia, and students, to drive innovation and accelerate the growth of the fintech sector. It offers state-of-the-art facilities, including a co-working space, a sandbox environment for testing new technologies, and access to a network of mentors and experts. Read more here.
The Central Bank of the UAE (CBUAE) enhances suptech initiative as part of its Financial Infrastructure Transformation (FIT) programme. The CBUAE is partnering with Accenture to implement a range of transformative services for the CBUAE’s suptech initiative and the enterprise data management (EDM) programme by adopting best-in-class digital solutions. Suptech will automate and streamline activities for banks and licensed financial institutions and the EDM programme will ensure the integrity of the CBUAE’s data and provide advanced capabilities for analytics, automation, and AI-driven decision-making through a single unified supervision portal. Read more here.
India introduces ‘Vishvasya’ tech stack to promote blockchain uptake. The Ministry of Electronics and Information Technology (MeitY) in India has recently launched the Vishvasya-blockchain technology stack to enhance the adoption of blockchain technology by offering blockchain-as-a-service (BaaS) with a geographically distributed infrastructure designed to support various permissioned blockchain-based applications. The Vishvasya stack is designed to improve digital service delivery’s transparency, security, and efficiency. Read more here.
Central Bank of Brazil (BCB) announces projects for next digital currency tests. The BCB has published a list of 13 selected use cases for the second phase of its CBDC pilot scheme. Phase two involves testing the implementation of “smart contracts” for Brazil’s CBDC, known as drex. These will be created and managed by third parties and executed automatically once the terms are fulfilled. The confirmed focus areas include collateralised credit in government securities, trade finance and real estate transactions. Read more here.
United Kingdom’s Financial Conduct Authority (FCA) is taking an innovative and data-led approach to fighting financial crime. Using data and technology, the FCA has increased its capacity to identify illegal financial promotions on websites and social media. The authoritiy is tackling fraud faster by scanning approximately a hundred thousand websites every day to identify those that appear to be scams. Over 10,000 potentially misleading adverts were either amended or withdrawn because of the FCA’s action in 2023 – an increase of 17% on 2022. Last year, the authority hosted a 3-day investment fraud tech sprint drawn from regulatory, intelligence and law enforcement agencies to design new ways to tackle this type of fraud. Read more here.
Saudi Central Bank (SAMA) permits fintechs to practice open banking. SAMA has authorised three new fintech startups to test their innovative solutions in its regulatory sandbox. “XSquare” and “NeotTek” are authorized to launch an open banking platform, and “MoneyMoon” is authorized to launch a peer-to-peer lending platform. With these additions, the total number of fintechs operating under SAMA’s regulatory sandbox increased to 19. Since its launch in 2018, SAMA’s regulatory sandbox has permitted 50 fintechs to test and refine their offerings in a controlled environment. Read more here.
FCA consults on delays to faster payments related to APP fraud. The Treasury has proposed amendments to the Payment Services Regulations (PSRs 2017) to enable Payment Service Providers (PSPs) to delay payment transactions where they have reasonable grounds to suspect fraud or dishonesty. The policy aims to increase firms’ ability to tackle APP fraud while minimising the impact on legitimate payments. To support this policy, the FCA proposes changes to its “Payment Services and Electronic Money – Our Approach” document to explain how PSPs should apply the legislative changes to minimise the impact on legitimate payments. The consultation period will run until October 4, 2024. .
Federal bank regulatory agencies in the United States of America extend the comment period on bank-fintech relationships to October 30, 2024. This extension, announced by the Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), allows more time for stakeholders to provide input on the nature and implications of bank-fintech arrangements, as well as effective risk management practices. Read more here.
Satellite data offers a promising solution for addressing climate-related data gaps – Bank of Spain paper. By providing spatio-temporal information from Earth-orbiting sensors, satellite data can enhance data availability, add geo-location details, and improve the reliability of self-reported corporate data. Despite challenges like availability, reliability, and comparability issues, satellite data’s high quality and transparency make it a valuable asset for advancing green finance and other domains. For optimal impact, satellite data should be integrated with other data sources and technologies, such as machine learning, to provide deeper insights and drive new financial products and markets. Read more here.
ECB working paper finds that previous CBDC research relied on outdated assumptions. The paper reviews how macroeconomics has since 2016 approached the possible introduction of retail CBDC. A review of the literature reveals that macroeconomic models of CBDC often rely on CBDC design features and narratives which are no longer in line with the one of central banks actually working on CBDC. These studies do not account for the “conservative” nature of CBDC issuance and do not start from design features communicated by central banks. Read more here.
Most jurisdictions have established suitable regulations for AI – Organisation for Economic Co-operation and Development (OECD) paper. This report analyses different regulatory approaches to the use of AI in finance in 49 OECD and non-OECD jurisdictions based on the “Survey on Regulatory Approaches to AI in Finance”. Most respondents reported having appropriate regulations in place, though they noted some gaps and the potential need for broader guidance. The lack of specific sectoral AI regulations may be explained by the fact that there exists financial laws that apply to activities regardless of technology. Read more here.
European Banking Authority (EBA) study calls for stablecoin reserves transparency. Stablecoin issuers can become subject to runs just like banks. To mitigate this risk, recent regulatory initiatives propose that reserve–asset portfolios should be overcollateralised, and that stablecoin issuers provide sufficient disclosure to holders about their composition. According to the researchers, transparency incentivises stablecoin issuers to keep a larger share of the reserves in liquid assets, thus reducing the risk of runs and potential bankruptcy ex–ante. In addition, transparency on reserves disincentivises stablecoin holders from irrationally demanding the reimbursement of their funds. Read more here.
New Zealand’s Financial Markets Authority (FMA) publishes research on AI use in the financial services sector. The research surveyed 30 regulated entities, including deposit takers, insurers, asset managers, and financial advice providers, to generate insights, and the response rate was 40% (13 entities). The FMA was primarily interested in the uses of AI, including GenAI, machine learning, AI decision-making tools, and chatbots. The key concerns identified include algorithmic bias, data privacy, cybersecurity, governance and transparency, operational resilience, and over-reliance on GenAI tools. The FMA will host a roundtable on 1 October 2024 with the study participants to further explore AI use and risk management. Read more here.
BIS working paper investigates the impact of generative artificial intelligence (Gen AI) on labour productivity through a field experiment in the coding industry. The study focuses on the impact of a large language model (LLM) called CodeFuse, introduced by Ant Group in September 2023 to assist programmer teams with coding. The experiment involved two groups of programmers: one with access to CodeFuse (the treatment group) and one without (the control group). The research finds that GenAI increased code output by more than 50%. However, productivity gains are statistically significant only among entry-level or junior staff, while the impact on more senior employees is less pronounced. Read more here.
Events
Supervision Innovators Conference by the ECB. Held between September 18 and 19, this annual event brings together global leaders in banking supervision to foster collaboration, share experiences, and showcase cutting-edge tools and technologies. The conference features keynote speeches, panel discussions, and breakout sessions on topics such as artificial intelligence in supervision, human-machine collaboration, and the future of banking supervision. Read more here.
