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Building an innovative supervisory culture

16 February 2022

Now more than ever, innovation is at the heart of banking supervision. Qualitative and quantitative information, data models and analytical tools have always played a key role in helping supervisors understand the banks they supervise. Modern technology can increasingly help to turn the information available into new insights and enhance supervisory work. With a view to making the best use of the ever-increasing amounts of available data, at the end of 2019 European banking supervision embarked on an ambitious digital transformation process to introduce its own supervisory technology (suptech) solutions. Now, two years on, the ECB is incorporating the first new tools into its supervisory work.

Such technological change comes with its own unique challenges, including how to successfully move forward at this critical moment – where ideation becomes implementation. This was the subject of the ECB’s second global Supervision innovators conference, held on 29 November 2021.

The virtual conference brought together participants from across the globe to discuss technological innovation in banking supervision.

In her keynote address, Kay Firth-Butterfield, Head of Artificial Intelligence (AI) and Machine Learning and Member of the Executive Committee of the World Economic Forum, focused on the ethics of AI and the imperative of using this technology responsibly. The panel discussions that followed provided real-world insights into the interplay between technological innovation and the work environment and explored how to address the main challenges associated with turning AI solutions from idea to reality.

Six authorities from around the world then shared practical examples of how they have been able to enhance their supervisory processes by using technologies such as natural language processing, machine learning and advanced data analytics. Presenters noted that by applying cutting-edge suptech solutions, European banking supervision can become more effective and ensure it keeps pace with, or even moves ahead of, developments in a dynamic and ever-changing banking landscape.

Also discussed was the role of multidisciplinary innovation teams and how they have been established as part of the development process for suptech tools. The teams, which consist of ECB and national supervisors, statisticians, information governance experts and IT experts, have played a key role in identifying supervisory needs and their technological solutions. The agile nature of these teams and their dynamic working arrangements have helped to advance the suptech projects identified, creating a fertile environment for ideas and solutions to enhance the work of supervisors.

Participants also remarked that fostering and developing technological ambition within the ECB has been crucial. To promote a culture of innovation, and to build knowledge and understanding of suptech, European banking supervision has introduced a comprehensive digital training curriculum. Recently, over 600 supervisors across Europe completed an introductory six-week training programme on AI and how it relates to supervisory work. There are plans to further develop and expand suptech training to meet the evolving needs of supervisors. These initiatives are all part of ECB Banking Supervision’s ambition to lead the way in the use of suptech.

In his remarks at the Supervision innovators conference, Supervisory Board Chair Andrea Enria highlighted the importance of working together to enhance supervisors’ knowledge of new technologies and foster innovation in supervisory processes. “Only through the use of advanced technologies are we able to gather the knowledge needed to challenge banks in areas such as IT, cyber and other tech-related risks, which banks are increasingly exposed to. We can only supervise what we know,” he said.

Pentti Hakkarainen, ECB representative to the Supervisory Board and Chair of the Steering Committee Digital Agenda, underscored this point in his speech, emphasising that for supervisors the “development work never stops and there is always potential for further improvement”.

Against this backdrop, ECB Banking Supervision will continue to foster such productive exchanges of knowledge and is pleased to announce that the next global Supervision innovators conference is scheduled for September 2022.


European Central Bank

Directorate General Communications

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