Using digital technology to perform financial institutions regulatory requirements and improve the regulation and supervision efficiency (Regulatory Technology and Supervisory Technology) helps to reduce the regulatory burden and at the same time increase the quality of accounting information, to ensure the transparency of the financial institution, according to the advisory report “Problems and directions of development of regulatory and supervisory technologies (regtech and suptech) on the financial market in Russia ” (Russian language).
As the international experience analyzed in the report shows, thanks to regtech, financial organizations can streamline the regulatory compliance process, including reporting, speed up and improve the reliability of customer identification procedures, improve the quality of transaction analysis, and provide risk control and counter cyber threats. Suptech technologies can allow regulators to automate and simplify administrative procedures, translate tools for interacting with financial market participants into digital format, improve the decision-making support system, and reduce their own costs for performing supervisory functions.
In this area, the Bank of Russia is already implementing a number of projects: daily collection of banks’ transactional data (the “Operational Day Information” project), automating the process of calculating and monitoring compliance with mandatory ratios, creating a collateral register on a single platform to reduce credit risks, creating a unified register of deposits to protect interests of investors and others. The regulator is also working on initiatives to introduce in the future elements of regulation and supervision using new technologies: digitalization of regulatory requirements and the creation of a digital database of supervisory documents, digitalization of compliance procedures, etc. In addition, the regulator is planning a number of initiatives that expand the use of regtech and suptech tools with the Bank of Russia validation and control models in supervised institutions.
Implementation of regtech and suptech solutions is a prerequisite for the development of the financial market. But at the same time, the development of new digital technologies leads to a change in the risk profile of financial market participants, and therefore the development of regtech and suptech should be accompanied by the adaptation of risk assessment and control procedures in accordance with the features of new technologies, processes and business models, the report says.
The central bank is issuing a consultation for market participants to answer which of the proposed regulatory changes can be optimized through the use of digital tools (cloud technologies, machine learning, centralized data collection and processing tools, etc.), in which areas of regulation will regtech and suptech be most relevant, and in what form of cooperation between banks, developers and the regulator should these projects be implemented. At the same time, it is proposed to discuss the issue of eliminating legislative problems in the process of preliminary testing of new technologies, which can take place at a specially created Bank of Russia site – the regulatory sandbox.