The ECB’s suptech innovation house: Paving the way for digital transformation of banking supervision

Daniela Schackis, Lukasz Kubicki and Maia Köhler

Contents

Foreword

Preface

Preface

Introduction: Suptech/regtech defined: Payments, sandboxes and beyond

1.

The uncertain prudential treatment of cryptoassets

2.

US regulatory certainty versus uncertainty for crypto and blockchain

3.

Bermuda: Suptech and regtech supporting the risk-based approach

4.

Suptech: A new era of supervisory philosophy

5.

Cloud computing in the financial sector: A global perspective

6.

DeFi protocol risks: The paradox of cryptofinance

7.

IT transformation in the Prudential Authority of South Africa: A case study

8.

Making the vision a reality: Perspectives from the Monetary Authority of Singapore

9.

Lessons from Hong Kong through the lens of the HKMA

10.

Technological change: Is it different this time?

11.

The ECB’s suptech innovation house: Paving the way for digital transformation of banking supervision

12.

China’s financing opening up and regulatory convergence with the world

13.

Disclosures and market discipline: The promise of regtech

14.

Regtech and new derivatives developments

15.

Fintech and regtech: Leading the evolution and regulation of alternative investments

16.

The role of artificial intelligence and big data in investment management

17.

The promise and challenges of machine learning in finance

18.

Data privacy and alternative data

19.

Digital ID and financial inclusion

20.

Strategic technology: Regulation and innovation of CBDCs

21.

Regulatory sandboxes: Innovation and financial inclusion

22.

Technology and sandbox development innovation in a transitional market: A case study

23.

Developing the regulatory ecosystem: The evolution of stablecoin

24.

Central bank digital currency, regtech and suptech

25.

Digital dollar: Cryptocurrency for everyday commerce

26.

CFTC regtech implications for virtual currency trading

27.

Fintech, regtech, suptech and central bank decision making

At the end of 2018, the European Central Bank (ECB) identified a strong need to assess how frontier technologies could be harnessed by banking supervisors. Although banking supervision has always been a field that relies extensively on the professional experience and expert judgement of supervisors, it was recognised that cutting-edge technology, including artificial intelligence (AI), could not be overlooked.

After exploring the topic more closely and discussing it with peers and institutions across the world, the enormous potential of AI for banking supervision in terms of efficiency gains and higher analytical capabilities became obvious. Data is the foundation of AI, and supervisors have access to large amounts of data in different forms. Successful application of AI could provide deep insights into this data and benefit our work. It also became clear that modern technologies could eliminate some manual tasks and therefore enable colleagues to spend more time refining their professional judgement and delivering state-of-the-art supervision.

The ECB therefore incorporated the use of supervisory technologies (suptech) as a core element into its strategic vision for banking

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