In the Loop, #23

Hi Suptech Community,

Welcome to the 23rd issue of the Cambridge SupTech Lab bi-weekly LinkedIn newsletter, a source for updates on recent innovations, breakthroughs, opportunities, upcoming events in the suptech field, and news from the Cambridge SupTech Lab team.

If you would like to flag any items for inclusion in the next newsletter, please email us at [email protected]. Occasionally, we email our global community of supervisors, data scientists, vendors, and suptech experts to share event invites, news, or new courses—subscribe here.

This edition includes news from the Global Government Fintech, Bank for International Settlements, Bank of Spain, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Toronto Centre, International Monetary Fund, Reserve Bank of India (RBI), Network for Greening the Financial System (NGFS) and others.

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Highlight

AI (Artificial Intelligence) for Supervisory Innovation: A Practical Bootcamp facilitated by the Cambridge SupTech Lab. Forming part of the Currency Research Payments, Innovation and Technology Week, bootcamp participants will gain insights into the evolving AI landscape and its transformative impact. It focuses on diving into AI fundamentals and models, exploring machine learning and natural language processing, and examining ethical considerations and the role of public-private partnerships and collaborations in developing AI strategies. This event is part of the Central Bank AI Conference in London, September 23 to 26. Read more and register here.

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Suptech Innovations

Bank Negara Malaysia (BNM) and partners launch the National Fraud Portal (NFP) to solidify coordinated efforts in curbing financial scams. Developed and administered by PayNet (Payments Network Malaysia) in partnership with the BNM and the financial industry, the NFP unites the financial ecosystem to safeguard the public against evolving financial scams. As an integrated platform, the NFP automates the end-to-end process of handling scam reports and tracing stolen funds, boosting the operational capabilities of the National Scam Response Centre (NSRC). Read more here.

Bangko Sentral ng Pilipinas (BSP) to enhance data analytics. The BSP is developing a fit and proper system that banks and non-banks can use as a metric while developing supervisory processes by further enhancing its data analytics and suptech capabilities. The fit and proper system launch is intended for use by BSP-supervised financial institutions (BSFIs) and in implementing the Comprehensive Credit and Equity Exposures Report (COCREE). Read more here.

Cambridge SupTech Lab publishes case study on financial consumer protection suite with web scrapping and machine learning-based analysis. This case study outlines the development of a functional prototype featuring a financial consumer protection suite with social media and web scraping, sentiment analysis, topic modelling, and other machine learning-based analytics. The Lab developed the solution in collaboration with BSP, the Securities and Exchange Commission of the Philippines, and suptech vendor, Winnow Technologies. Read more here.

Australian Securities and Investments Commission (ASIC) pilots new portal for licence applications. ASIC is developing a new digital portal for applying, varying, and cancelling an Australian financial services (AFS) licence. A limited, invitation-only pilot launch opened on 12 August 2024. Modernisation simplifies the experience of AFS licence applicants and makes them more streamlined and user-friendly. All AFS licensees and applicants will transition to the new AFSL Portal in the first quarter of 2025. Read more here.

Insight engine for the Single Supervisory Mechanism (SSM), Project Athena. The application serves as a search engine to support human decision-making on institutions in terms of the SSM processes. It only processes structured and unstructured data, containing for instance, news, guidelines, policies, internal capital adequacy assessment process (ICAAP) or the internal liquidity adequacy assessment process (ILAAP) reports and Supervisory Review and Evaluation Process (SREP) narratives. Personal data is not in the focus of project Athena. Read more here.

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Central Banking & Technology

Brazil's Central Bank (BCB) establishes a ‘centre of excellence’ for data science and artificial intelligence (AI). The internal hub that the BCB is developing will be under the IT department. The new centre has a specific responsibility to propose governance guidelines for the ‘safe and ethical’ development and deployment of software services that use data science and AI, assess requirements for the central bank’s use of generative AI products and services, and devise training programmes. Read more here.

Bank for International Settlements (BIS) unveils Project Keystone to explore how technology can enhance the analytical use of ISO 20022 data. The increased use of ISO 20022 standards for payment messages in Real Time Gross Settlement (RTGS) systems means many central banks will adopt the protocol in the coming years. Project Keystone, an initiative by the BIS, in cooperation with the Bank of England, seeks to develop a standardized data analytics platform focused on ISO 20022 data. As part of the project, two modules will be developed. The first will address the complexities of handling the ISO 20022 data structure and the associated data storage requirements, and the second will provide an analysis based on the data. Read more here.

Reserve Bank of India (RBI) to launch Unified Lending Interface (ULI) to enable frictionless credit. During the RBI@90 Global Conference on “Digital Public Infrastructure and Emerging Technologies” in Bengaluru, the RBI Governor Shri Shaktikanta Das proposed the ULI platform, which will facilitate a seamless and consent-based flow of digital information and reduce the time taken for credit appraisal, especially for smaller and rural borrowers. He mentioned that the ULI architecture has common and standardised APIs designed for a 'plug and play' approach to ensure digital access to information from diverse sources. Read more here.

Central Bank of the Bahamas (CBB) consults on the feasibility of introducing a fintech regulatory sandbox. The CBB anticipates that the sandbox will enhance its supervisory capacity to accommodate financial technology innovators and services providers seeking to introduce innovative products, services, delivery channels, and technology platforms to potential customers. The consultation paper outlines the proposed structure of the sandbox framework and identifies challenges and considerations given the current regulatory environment. The paper also addresses the eligibility criteria for applicants seeking to participate in the sandbox and the stages of the regulatory sandbox lifecycle for approved applicants. Read more here.

United Kingdom’s HM Revenue & Customs (HMRC) engages San Fransisco-based ‘blockchain intelligence’ firm TRM Labs. HMRC is working with TRM Labs to help fight crypto-enabled money laundering. TRM Labs’ contract includes the provision of ‘analytical or scientific software’ and ‘investigation and security services’. According to the award notice, it has a value of ￡288,000 (about $375,000) and will run until 1 April 2025. Read more here.

Colombia's digital inclusion strategy is bolstering financial inclusion. The Central Bank of Colombia (Banrep) is leading a large-scale digitalization project to strengthen financial inclusion — especially for women and the most remote communities. The Colombian strategy's digital public infrastructure (DPI) components also include interoperable digital payments, digital identity systems and the ability to share data between institutions, thus providing a potential model for other countries. The digital ID and fast payments system, in particular, will enhance financial inclusion by providing secure, efficient and accessible digital financial services to underserved populations. It gives digital tools so individuals can empower themselves and foster economic growth. Read more here.

Bank of Spain emphasizes the need to apply financial technology innovation to supervisory functions in its 2024 strategic plan. Central to this initiative is developing suptech tools and fostering a culture of innovation. This involves developing and applying these tools, supported by a roadmap running through 2024, which includes in-house suptech tool creation, active participation in the Single Supervisory Mechanism's (SSM) suptech initiatives, and a focus on data science training. The plan also highlights the use of a regulatory sandbox for testing innovative financial technologies, allowing for controlled experimentation with new projects while evaluating their impact and regulatory compliance. Read more here.

BIS warns banks of emerging risks from permissionless blockchains. According to a recent paper published by the BIS, permissionless blockchains or similar distributed ledger technologies (DLTs) introduce several risks that banks are still grappling with. The paper considers the risks related to operations and security, governance, legal, compliance (including money laundering/financing of terrorism) and settlement finality. Certain risks stem from the blockchain's reliance on unknown or third parties, which makes it difficult for banks to conduct due diligence and oversight. These risks require new risk management strategies and safeguards. Read more here.

Network for Greening the Financial System (NGFS) study highlights the need for central banks to understand the economic impact of climate change. According to the report, the adverse effects of severe weather events are not limited to the destruction of output, capital, and real estate but extend to the broader economy because supply, demand, and financial channels amplify and propagate the effects of the initial shock. The expected increase in the frequency and severity of severe weather events will likely affect monetary policy decisions. More work is needed to describe better the range of the climate-change-related uncertainty relevant to monetary policy and financial stability to formulate concrete policy options. Read more here.

Central Bank digital currency (CBDC) data use and privacy protection. This note offers a framework to help countries navigate and tools to help them manage the trade-offs between CBDC data use and privacy protection. It emphasizes the role of institutional arrangements, data collection, access and storage policies, design choices, and technological solutions. At a given level of privacy preference, central banks can facilitate better use of CBDC data through robust transparency and accountability arrangements, sound policies, and judicious adoption of privacy-by-design approaches, including the use of privacy-enhancing technologies. Read more here.

Bank of Spain paper discusses the potential of satellite data in transforming green finance. Central banks are addressing climate data gaps to advance green finance, driven by demands for better disclosure and environmental considerations. Satellite data offers valuable insights and can complement existing data sources, though challenges include limited availability, high costs, and comparability issues. The paper explores satellite data's potential in assessing physical risks, deforestation, and agricultural risks, suggesting that integrating this technology with other data sources could enhance green finance strategies. Read more here.

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Events

Toronto Centre to conduct the fourth and fifth webinar of the series on the revised Core Principles for effective banking supervision on September 18 and September 25, 2024. The fourth webinar will bring discussions around the importance of operational resilience for banks in a rapidly changing world and the role of proportionality in effectively scaling standards for different banking sectors. On the other hand, the fifth panel will examine the inclusion of climate risk in the updated Core Principles and highlight why both banks and supervisors should adopt flexible practices to address the evolving nature of climate risks. Read more of the fourth webinar here and fifth one here.

The Cambridge SupTech Lab’s Practical Data Science in Financial Supervision course begins on 9th September. The 6-week, online, asynchronous training programme centres on applying best practices and cutting-edge tools to achieve data-driven supervision through a series of theoretical modules and hands-on exercises. Designed for both supervisors and data scientists, the course equips participants with the skills to unlock the full potential of data science while maintaining ethical and responsible data collection, handling, and analysis using AI and other advanced technologies. To learn more about the programme, and to enrol, click here.?