Financial supervisors enhance oversight, use of data and analytics with SupTech
- July 11, 2024
- 5 minutes
As regulated entities see gains by increasing the use of technology in their reporting processes so do the financial supervisors in overseeing them. Supervisory Technology, referred to as SupTech, allows regulatory institutions, central banks and other financial supervisors, to automate complex processes, enable digital supervisory and reporting processes, and improve data, analytical and enforcement capabilities.Â
Due to these factors, the adoption of the SupTech is on the rise. A recent survey by the Cambridge SupTech Lab proves this in numbers. 81% of surveyed financial authorities indicate their involvement in various SupTech initiatives, up from 71% in 2022.
Central Banks on the promise of SupTech
What is SupTech? SupTech is defined as innovative technology used by supervisory authorities to support their work. Many central banks and other supervisory authorities have been experimenting and developing SupTech tools on their own or partnering with technology vendors for several years.
Prudential banking, consumer protection and market conduct, anti-money laundering/counterterrorism financing and proliferation (AML/CFT/CPF), and cyber risk supervision persist as the primary areas of focus for SupTech applications.
Ultimately, at the core of effective SupTech initiatives is the synergy between establishing trusted data and robust leadership. While robust leadership is more about developing a well-articulated and efficient SupTech strategy, resilient data infrastructure enables digital transformation.
Since financial supervision is intrinsically linked to digital processes – high-quality, trusted, unified data forms the bedrock of efficient data flows. These include various processes, starting from the automated gathering of data to secure storage, culminating in its effective utilisation for decision-making, and ensuring that data practices align with broader organisational goals and regulatory requirements.
Supervisory authorities have been enhancing their data infrastructures and capabilities to navigate challenging environments while keeping pace with the latest market trends. As a result, several notable initiatives have emerged in 2023.
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) partnered with the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) in a strategic move to foster innovation in regulatory compliance through artificial intelligence. The Monetary Authority of Singapore (MAS) also launched Gprint, a cutting-edge digital platform that leverages technology to streamline the collection and utilization of environmental, social, and governance (ESG) data, thereby supporting the financial sector’s sustainability efforts.
In Germany, the Central Bank began experimenting with OpenAI technology to develop a knowledge assistant product. Meanwhile, in the Philippines, the Central Bank completed a five-year project initiated with the RegTech for Regulators Accelerator (R2A) to migrate all financial institutions’ regulatory reports to APIs, showcasing a significant advancement in modernization and efficiency.
Supervisory intelligence greatly depends on data definition and standardisation
One of the main promises of SupTech lies in transitioning from traditional templates and manual procedures to more advanced approaches. These include data input and extraction methods, enhanced data accessibility, and sophisticated reporting utilities.
Technology-enhanced supervision is not considered a new concept. Various technology solutions have been adopted by supervisory authorities over the years to improve the efficiency of supervisory processes and activities—for example, database management software, adoption of data standards like XBRL (that is, eXtensible Business Reporting Language), and other electronic reporting templates and tools to capture and analyze data.
The Central Bank, one of the Group of Twenty (G20) members, teamed up with
BR-AG to proceed with standardising the definitions and common data understanding across multiple areas such as banking supervision, insurance supervision and statistics.
Discover the project:
According to Cambridge SupTech Lab (2023), State of SupTech Report 2023, more than half of the financial authorities, specifically 55.8%, have already adopted standard data definitions and collection templates for financial institutions. This adoption indicates a movement towards greater consistency in data collection practices within the financial sector.
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Data validation and processing
Data validation is essential in data management, ensuring the accuracy and quality of data, which leads to better analytics and more efficient decision-making.
Data templates often require supervised entities to manually transcribe data from their proprietary systems into spreadsheets. These spreadsheets must then be manually uploaded via a web portal or secure file transfer protocol server. The data collected today is typically in a format that necessitates downstream manual processing.
In addition to these largely manual data collection methods, a significant portion of data collection formats requires manual processing by either the supervised financial institution (for data preparation and submission) or the financial authority (for data processing and analysis).
Adopting data standards like XBRL can eliminate resource-intensive manual processes, reducing the demand for human effort and time and making the process less prone to errors that could compromise data quality.
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One SupTech Platform for various supervisory use cases
These findings emphasize the necessity of a robust design and support for APIs to effectively manage the complex and dynamic nature of financial data collection, management, and validation. One of the significant advantages of implementing a SupTech platform that caters to diverse requirements is its ability to support multiple applications across various supervisory use cases.
At BR-AG, we designed the SupTech Platform – ATOME, for supervisory authorities and regulators who deal with regulatory and supervisory data, including change management for existing and new regulatory requirements. The platform empowers more efficient regulatory data management – from data definition, collection, quality assurance, and reporting to processing, storage and analysis.
It allows building on the data connectivity and standardisation with advanced interoperability options and the use of open data standards by supporting SQL, Excel-based, XBRL data flows and integrations via APIs.
There are efficiencies to be gained at each stage of the data journey – the ATOME platform helps your teams to reach them, letting automation take over where time and efforts may be better used for insights and data-driven decision-making.
Contact our experts to discuss your challenges and current digital transformation objectives, and to see how SupTech can support you: