UAE SCA and Arab Exchange Federation launch webinar on Suptech

Suptech (Supervisory technology) is a new term that is proliferating within supervisory and regulatory organizations across the globe. Supervisory technology (suptech) is the use of innovative technology by supervisory agencies to support supervision. It helps supervisory agencies to digitize reporting and regulatory processes, resulting in more efficient and proactive monitoring of risk and compliance at financial institutions.

A number of supervisory agencies are already using innovative ways to effectively implement a risk-based approach to supervision. Now, technological progress as well as data availability offers the potential to radically improve existing supervisory tools or develop better ones through suptech applications. Suptech is currently found in two areas of applications: data collection and data analytics.

Within data collection, applications are used for supervisory reporting, data management and virtual assistance. Examples include the ability to pull data directly from banks’ IT systems, automated data validation and consolidation, and chatbots to answer consumer complaints while collecting information that could signal potential areas of concern. Within data analytics, applications are used for market surveillance, misconduct analysis as well as microprudential and macroprudential supervision. Examples include detecting insider trading activities, money laundering identification, monitoring supervised entities’ liquidity risks and forecasting housing market conditions. These applications are in different stages of development and implementation, ranging from academic research questions through proofs-ofconcept and use-cases to fully operational.

Suptech has many benefits that include enhanced effectiveness, reduced costs and increased capability. Yet is also has its challenge such as computational capacity constraints, increased operational risks, including cyberrisk, data quality, finding the right talent, management support and buy-in from supervision units, and  rigid rules in project management. Lack of transparency in some of the data analytics applications is also a critical issue. Hence, human intervention in the form of supervisory expertise is still viewed as indispensable in the supervisory process, particularly in further investigating the results of analyses and deciding on a course of action.

Subptech utilizes innovative technologies such as Aritificial intelligence, Machine learning and even blockchain According to a recent research conducted by the Bank of International Settlements, about half of the 39 financial authorities it surveyed have explicit suptech strategies or are developing them. The majority of suptech initiatives reported however are still in either the experimental or development stages, with less than a third operational.

In addition Blockchain and artificial intelligence are going to be crucial components of Regulatory Technology, or Regtech, according to a recent report by JD Finance. Regtech can be divided into two parts — Supervisory Technology (Suptech) and Compliance Technology (Comptech).