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  • SUPERVISION NEWSLETTER

Digital transformation of supervision picks up pace

17 February 2021

Digitalisation has become increasingly important in recent years. However, digital transformation is an ambitious and wide-ranging process, as it requires rethinking organisational structures and adapting the working culture. In 2020 European banking supervision presented its comprehensive action plan to drive forward digital transformation at the ECB and the national supervisory authorities. This action plan fosters innovation and digitalisation to complement the current systems and practices used in supervision. The plan is not to replace these systems and practices, but rather to use new technologies to complement them. Since every change comes with its own set of challenges, how can European banking supervision make digital transformation a success?

First and foremost, when embarking on a transformation journey, it is essential to consider people first because they play a key role in the success of digital transformation. Staff should be empowered to embrace change and work in new ways. This requires creating and fostering a digital culture across all functions and at all levels. Nevertheless, it is not unusual for change and disruptive technologies to be met with scepticism within an organisation. This challenge was one of the topics discussed at the ECB’s first Supervision Innovators Conference on 30 November 2020. The online conference brought together participants from all over the world to discuss the latest developments in artificial intelligence (AI) and digital transformation in banking supervision. In her keynote speech, Susanne Klatten, entrepreneur and Chair of the Supervisory Board of UnternehmerTUM GmbH, shared her vision of “human tech”. She emphasised that technology will not replace human capabilities but will instead enhance and refine our analytical capacities. Jekaterina Govina, Lithuania’s member of the ECB’s Supervisory Board, underscored this point by stressing that in the future AI will assist supervisors by relieving them of repetitive tasks. AI could further help to overcome human bias and enable greater connectivity between different systems and data. Ms Govina highlighted that European banking supervision needs to be ready for the increased adoption of AI by financial market participants. Banking supervisors need to make a big effort to raise awareness of the impact of new technologies on banking processes and to strengthen their technology skills.

Against this backdrop, European banking supervision is currently developing a comprehensive training programme on supervisory technologies (suptech). The training will cover, among other topics, machine learning techniques applied for supervisory purposes and is aimed at staff at all levels of the ECB and the national supervisors. It is intended to include courses on behavioural skills, such as teamwork, agility and knowledge-sharing, in the programme as these are key factors in accelerating digital transformation.

Technological change requires more than just the right culture, structure and working practices. That is why European banking supervision introduced a hub-and-spoke innovation model to foster agile collaboration and the joint development of suptech solutions. In this hub-and-spoke structure, innovation teams from the ECB and national supervisors pool their knowledge and contribute to the overall goal of digital transformation. These teams are composed of experts from various functions (e.g. IT, supervision and statistics), with diverse skill sets. They are already working on implementing a number of suptech projects, including in the areas of advanced data analytics and textual analysis. To promote collaboration and innovation, the ECB is building a state-of-the-art platform: the Virtual Lab. This platform facilitates cross-border teamwork and allows European banking supervisors to explore innovative ideas and to collaborate on AI developments and other projects. Knowledge-sharing plays an important role in creating synergies and identifying the areas in which suptech can make the greatest contribution.

European banking supervision does not only want to develop and incorporate state-of-the-art technologies in its daily practices. As Pentti Hakkarainen, ECB representative to the Supervisory Board and Chair of the Steering Committee Digital Agenda, underlined in his speech at the Supervision Innovators Conference, European supervisors want to be at the forefront of digitalisation and help drive suptech innovation around the world. To achieve this, European banking supervision has established a network in which academics, start-ups and leading authorities work together on suptech innovation. Successful digital transformation requires a collaborative community in which members share information. Supervisory Board Chair Andrea Enria explained why such a community makes a difference: “Innovation is not an individual sport. We only have a chance to create something big if we share our achievements and the lessons we have learned and inspire each other.” With this in mind, ECB Banking Supervision is pleased to announce that the next global Supervision Innovators Conference is scheduled for autumn 2021.

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