Suptech: A new era of supervisory philosophy

Rūta Merkevičiūtė

Supervisory technology (suptech), defined as the use of innovative technology by supervisory and regulatory authorities, is developing rapidly. Suptech is designed to bolster supervisory capabilities in the digital era. Around the world, financial sector supervisors are experiencing a profound shift to data-driven supervision enabled by the next wave of technology and data solutions. In implementing suptech, supervisory authorities are often driven by two different motivations: (i) increasing operational efficiency; and (ii) improving hypothesis-driven supervision. The former often entails helping supervisors test and prove hypotheses using new sources of assessments or data by replacing elements of the supervisory decision framework with data and algorithms, resulting in significant efficiency gains, while the latter entails assisting supervisors in testing and proving hypotheses using new sources of analyses or data.

The expansion of digital activity prompted by the Covid-19 pandemic has re-emphasised the value of suptech for supervisory authorities. The direct and automated collection of granular regulatory data from supervised institutions is critical to replacing on-site