In the Loop, #26

Hi Suptech Community!

Welcome to the 26th 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 AIR - Alliance for Innovative Regulation, Bank for International Settlements, Central Bank of the UAE, European Central Bank, Financial Conduct Authority, Global Government Fintech, International Finance Corporation, Monetary Authority of Singapore (MAS), Regnology, Regtech Africa, and others.

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++ Register for SupTech Week 2024, 9-13 December ++

Registration for the largest virtual gathering of leading experts in financial supervision is now open! Brought to you by Cambridge SupTech Lab and content partner World Economic Forum, the event will convene global thought leaders and innovators from across the suptech ecosystem to share ideas, research, solutions, and insights on the digital transformation of financial supervision. Discussions will centre around the synergetic deployment of human and technological capabilities that is reshaping financial supervision. We will dive into timely topics such as Generative AI, blockchain, APIs, and the cloud as suptech enablers; to climate risks, consumer protection, and cybersecurity; to risk-management in procuring new technologies; international collaboration; and standardisation. Register, learn more and get involved here.

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Suptech Innovations

The Bank for International Settlements (BIS) is launching project Aperta to investigate cross-border data portability through open finance interoperability. The project seeks to explore reducing friction and costs in global finance by enabling seamless cross-border data portability. Aperta is a prototype of a multilateral cross-border interoperability network that connects different jurisdictions' domestic open finance infrastructures, enabling consumer-consented, safe, secure and end-to-end encrypted financial data to be shared via application programming interfaces (APIs). The initial use case to be explored is in trade finance for small and medium-sized enterprises (SMEs), with many more applications to follow. Read more here.

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Central Banking & Technology

Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) conduct business continuity exercises. The two agencies jointly conducted the seventh edition of the exercise with financial institutions to strengthen the financial sector's crisis management and operational resilience. Participants were put through simulated exercise scenarios ranging from IT outages, cyber-attacks and operational disruptions. The aim was to test the institutions' ability to effectively respond to and recover from operational and business disruptions and their crisis communication plans. Read more here.

BIS Committee on Payments and Market Infrastructures (CPMI) reports to G20 on fast payment system interlinking and APIs to provide insights and recommendations to enhance cross-border payments. The CPMI has published two reports offering insights into enhancing cross-border payments by facilitating the interlinking and interoperability of payment systems. The report on the interlinking of fast payment systems aims to support private and public stakeholders when deciding on the governance and oversight of these arrangements. The report on greater harmonisation of the use of APIs sets out 10 key recommendations. Read more here.

Bank of Ghana receives the "Innovation in Digital Currency Design for Financial Inclusion" award for its pioneering work on the eCedi. This recognition was presented during the "2024 Payment, Innovation, and Technology Week", held in London from September 23 to 26, organised by Currency Research. Ghana was honoured for its exceptional design of the eCedi, emphasising governance, accessibility (both online and offline), interoperability, and infrastructure to enhance financial inclusion. Read more here.

Regnology wins regulatory reporting and suptech category awards in the Chartis RiskTech100 2024. This suptech vendor earned recognition for its commitment to delivering software solutions focused on regulatory reporting in the 19th edition of the Chartis RiskTech100 Ranking. The RiskTech100 ranking is a valuable assessment and benchmarking tool for all risk and compliance technology players. Read more here.

Palau unveils a blockchain-based savings bond prototype called 'Palau Invest'. The prototype's public debut follows the announcement just under three months ago that Japan-headquartered fintech company Soramitsu was working on a system to issue, manage and operate savings bonds using blockchain technology in an initiative supported by funding from Japan's government. Launching a prototype system demonstrates how digital savings bonds work, allowing the people of Palau to learn about the system before the Ministry of Finance issues the bonds. Read more here.

According to an ECB working paper, stablecoins are not 'crypto safe haven'. Despite their promised convertibility to real-world currencies, the paper argues that stablecoins do not act as "safe havens" against crypto or other financial shocks. It notes that stablecoins' balance sheets resemble money market funds (MMFs), with short-term liquid assets such as US Treasuries, high-quality commercial paper and bank deposits. Read more here.

Financial systems need to be "quantum-ready," according to a BIS study. Central banks have a crucial role in ensuring the financial system is well prepared for the security risks posed by quantum computing. This working paper examines both the benefits and risks of quantum technology in finance, noting that while quantum computers could offer faster solutions to complex economic problems, they also threaten financial stability by potentially compromising widely used cryptographic algorithms. Read more here.

The Financial Conduct Authority (FCA) and FinTech Scotland launched a financial inclusion techsprint on March 7, 2024, concluding with a showcase demo day on May 30. The 12 participating teams were given access to FCA Financial Lives Survey data and synthetic data from the FCA's Digital Sandbox. This was the first time the FCA partnered on a cohort model sprint. This partnership opened opportunities for off-ramping solutions and reflected the FCA's desire to ensure all UK citizens can access essential financial tools and services. Read more here.

International Finance Cooperation (IFC) releases a supplemental resource to its Biodiversity Finance Reference Guide, including impact reporting metrics for each eligible activity. The "Biodiversity Finance Metrics for Impact Reporting" document provides specific metrics for each eligible investment activity and project component listed in the IFC Biodiversity Finance Reference Guide. The resource supports issuers and borrowers in reporting on impact across individual projects and broader portfolios. Transparency and credibility of impact reporting is essential in enabling markets to transition to nature-smart approaches efficiently and to attract private capital at scale. Read more here.

Strengthening resilience to geopolitical shocks is a crucial priority for European Central Bank (ECB) Banking Supervision. In a keynote address at the eighth European Systemic Risk Board (ESRB), Claudia Buch, Chair of the Supervisory Board of the ECB, emphasised the need to prepare for a prolonged period of sustained geopolitical tensions. She outlined the ECB's three-pronged approach to enhance resilience, which includes identifying transmission channels, mapping risks into supervisory initiatives, and identifying gaps. The focus areas encompass governance and risk management, capital and liquidity planning, credit risk and operational resilience, and evaluating country-specific vulnerabilities. Read more here.

BIS paper explores language models for central banking (CB-LMs). This working paper introduces CB-LMs, specialised encoder-only models trained on a broad range of central bank texts. CB-LMs outperform their foundational models in predicting central bank idioms and even exceed state-of-the-art generative large language models (LLMs) in classifying monetary policy stances from Federal Open Market Committee (FOMC) statements. However, larger LLMs show superior performance in more complex sentiment classification tasks related to United States of America monetary policy. Despite their advantages, deploying these large models poses significant challenges for central banks regarding confidentiality, transparency, replicability, and cost-efficiency. Read more here.

The partnerships for information sharing under the anti-money laundering and countering the financing of terrorism (AML/CFT) regulation are crucial in advancing Europe's fight against financial crime - Ms Derville Rowland, Deputy Governor of the Central Bank of Ireland. Establishing the EU Authority for AML (AMLA) provides a vital opportunity to tackle regulatory fragmentation and strengthen the European AML/CFT framework. In her speech at the "Future of Financial Intelligence Sharing" event, Ms. Derville highlighted that for the new AML package to succeed, AMLA and national supervisors must foster partnerships for information sharing, emphasising that this responsibility cannot rest solely on authorities - the private sector must also play its role. Additionally, AMLA and national authorities must collaborate to raise standards and catalyse innovative solutions to combat AML/CFT effectively. Read more here.

Artificial intelligence can address stagnant productivity in Latin America and the Caribbean (LAC). Since 1980, income levels in the LAC have not converged with those in the US, unlike emerging Asia and Europe. This divergence is due mainly to sluggish productivity growth across industries, exacerbated by limited technology diffusion. Digital technologies and AI have the potential to boost productivity, expand the formal sector, reduce informality, and help the LAC region catch up with advanced economies. However, the region risks falling behind in AI adoption. To leverage AI benefits, policies should enhance technological diffusion and facilitate job transitions. Read more here.

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Events

The fourth edition of the Green Swan Conference to take place on November 8, 2024. This event brings together high-calibre speakers – comprising corporate leaders from sectors most relevant for greenhouse gas emissions, experts, academics and policymakers – to discuss how climate risk, adaptation and mitigation affect the supply side of the economy and what these economic effects imply for the work of central banks. The conference is co-organised by the Bank for International Settlements, the Bank of Japan, the Bank of Spain and the Network for Greening the Financial System. Read more here.??

The Central Bank of the UAE's (CBUAE's) national summit on financial crime compliance concludes successfully. The two-day summit, held on 9th and 10th October 2024, brought together high-level local and international experts and decision-makers from regulatory bodies and law enforcement authorities, with around 45 speakers addressing vital topics in financial crime compliance and anti-money laundering and combatting the financing of terrorism (AML/CFT). In his keynote address, His Excellency Khaled Mohamed Balama, Governor of the CBUAE, said the Central Bank is launching the first-of-its-kind suptech initiative in the region to combat money laundering operations effectively. Read more here.

American Fintech Council mini techsprint. In partnership with AIR and Orrick, the American Fintech Council (AFC) is hosting a mini, in-person techsprint in Washington, DC focused on exploring bank and fintech arrangements. The problem statement for this event is: How might regulators gain more visibility into and thereby knowledge of fintech's technologies, business activities, banking relationships, risk profile and business continuity plans so that all parties can be informed and aligned? The application deadline is October 18, 2024. Read more and apply here.