Suptech and regtech on the rise, says FSB
15 October 2020 Basel
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The Financial Stability Board (FSB) has observed an increase in the use of technology to help institutions meet their regulatory requirements and oversight authorities to bolster their supervisory capabilities, known as regtech and suptech, respectively.
In a new report, the board explains that opportunities offered by these innovations was created by a combination of factors that have come to the fore in recent years.
These factors include the substantial increase in availability and granularity of data, and new infrastructure such as cloud computing and application programming interfaces (APIs) which allow large data sets to be collected, stored and analysed more efficiently.
According to the report, authorities and regulated institutions have both turned to these technologies to help manage the increased regulatory requirements that were put in place after the 2008 financial crisis.
Suptech and regtech, the FSB notes, could have important benefits for global financial stability.
For authorities, the use of suptech could improve oversight, surveillance and analytical capabilities, and generate real-time indicators of risk to support forward-looking, judgement-based supervision and policymaking.
Meanwhile, for regulated institutions, the FSB says regtech could improve compliance outcomes, enhance risk management capabilities, and generate new insights into the business for improved decision-making.
For both authorities and regulated institutions, the efficiency and effectiveness gains, and possible improvement in quality arising from automation of previously manual processes, is a significant consideration, FSB notes.
The report describes suptech as a strategic priority for an increasing number of authorities.
Based on a survey of FSB members, the majority of respondents had a suptech, innovation or data strategy in place, with the use of such strategies growing significantly since 2016.
Authorities are also vigilant to possible risks that could arise from the use of suptech and regtech technologies, such as cyber threats.
Survey responses indicated that the risk reported to be of greatest concern was around resourcing, followed by cyber risk, reputational risk and data quality issues.
FSB found that a particular risk is over-reliance on methods built on historic data, which could lead to incorrect inferences about the future, and the potential for limited transparency of suptech and regtech tools.
Looking ahead, the potential catalytic role of data standards and the importance of effective governance frameworks for the use of suptech and regtech were also emphasised.
The report summarises that technology and innovation are transforming the global financial landscape, presenting opportunities, risks and challenges for regulated institutions and authorities alike.
FSB explains the opportunities offered by suptech and regtech have been created by the substantial increase in availability and granularity of data and new infrastructures such as cloud computing and application programming interfaces.
According to the report, these allow large data sets to be collected, stored and analysed more efficiently.
“Authorities and regulated institutions have both turned to these technologies to help them manage the increased regulatory requirements that were put in place after the 2008 financial crisis,” FSB notes.
The report was delivered to G20 Finance Ministers and Central Bank Governors for their virtual meeting on 14 October.
It includes 28 case studies giving practical examples of how suptech and regtech tools are being used.
In a new report, the board explains that opportunities offered by these innovations was created by a combination of factors that have come to the fore in recent years.
These factors include the substantial increase in availability and granularity of data, and new infrastructure such as cloud computing and application programming interfaces (APIs) which allow large data sets to be collected, stored and analysed more efficiently.
According to the report, authorities and regulated institutions have both turned to these technologies to help manage the increased regulatory requirements that were put in place after the 2008 financial crisis.
Suptech and regtech, the FSB notes, could have important benefits for global financial stability.
For authorities, the use of suptech could improve oversight, surveillance and analytical capabilities, and generate real-time indicators of risk to support forward-looking, judgement-based supervision and policymaking.
Meanwhile, for regulated institutions, the FSB says regtech could improve compliance outcomes, enhance risk management capabilities, and generate new insights into the business for improved decision-making.
For both authorities and regulated institutions, the efficiency and effectiveness gains, and possible improvement in quality arising from automation of previously manual processes, is a significant consideration, FSB notes.
The report describes suptech as a strategic priority for an increasing number of authorities.
Based on a survey of FSB members, the majority of respondents had a suptech, innovation or data strategy in place, with the use of such strategies growing significantly since 2016.
Authorities are also vigilant to possible risks that could arise from the use of suptech and regtech technologies, such as cyber threats.
Survey responses indicated that the risk reported to be of greatest concern was around resourcing, followed by cyber risk, reputational risk and data quality issues.
FSB found that a particular risk is over-reliance on methods built on historic data, which could lead to incorrect inferences about the future, and the potential for limited transparency of suptech and regtech tools.
Looking ahead, the potential catalytic role of data standards and the importance of effective governance frameworks for the use of suptech and regtech were also emphasised.
The report summarises that technology and innovation are transforming the global financial landscape, presenting opportunities, risks and challenges for regulated institutions and authorities alike.
FSB explains the opportunities offered by suptech and regtech have been created by the substantial increase in availability and granularity of data and new infrastructures such as cloud computing and application programming interfaces.
According to the report, these allow large data sets to be collected, stored and analysed more efficiently.
“Authorities and regulated institutions have both turned to these technologies to help them manage the increased regulatory requirements that were put in place after the 2008 financial crisis,” FSB notes.
The report was delivered to G20 Finance Ministers and Central Bank Governors for their virtual meeting on 14 October.
It includes 28 case studies giving practical examples of how suptech and regtech tools are being used.
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