FSB – The Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions: Market developments and financial stability implications

October 9, 2020

Findings

Technology and innovation are transforming the global financial landscape, presenting opportunities, risks and challenges for both regulated institutions and authorities alike. Opportunity from Suptech / Regtech, is due to a large increase in availability, the granularity of data, infrastructure such as cloud computing, application program interfaces (APIs).

Developments allow large data sets to be collected, stored, or analyzed more efficiently. Authorities and regulated institutions have both turned to these technologies to help them manage the increased regulatory requirements following the 2008 financial crisis.

Suptech and Regtech tools could have important benefits to maintain financial stability. For authorities, Suptech could improve oversight, surveillance, and analytical capability. Provide real-time indicators of risk, to aid forward-looking, and judgment-based decisions. For regulated institutions, Regtech could improve compliance outcomes, enhance risk management capabilities, and generate new insights for improving decision-making. For both authorities and regulated institutions, there are gains in efficiency and effectiveness, and improvement in quality from the automation of manual processes. Most FSB members were found to have a Suptech, innovation or data strategy in place.

Authorities are vigilant to possible risks from the use of Suptech or Regtech technologies. The survey shows most concerns over resourcing, cyber risk, reputational risk, and data quality. A particular risk is over-reliance on methods built on historic data leading to incorrect inferences about the future, and potential for limited transparency of Suptech / Regtech.

Future potentially catalytic role of data standards and the importance of effective governance frameworks for the use of Suptech and Regtech were also emphasized. The report was given to G20 Finance Ministers and Central Bank Governors on October 14, 2020.

For more information, visit www.fsb.org



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