Suptech: thriving in the digital age

15 November 2023

In response to the increasing digitalisation of the banking sector, ECB Banking Supervision has invested strongly in its own digital transformation in order to maintain effective and efficient supervision and to better understand the challenges and opportunities of the digital age.

Useful tools for supervisors

Over the last three years the ECB has been developing supervisory technology (suptech) tools in collaboration with national supervisors to address several pressing needs. More than a dozen of these have already gone live and are making the daily work of supervisors easier and contributing to the integration of European banking supervision.

One of these tools is Athena, a web-based platform helping supervisors find, extract and compare information from a corpus of millions of articles, supervisory assessments and bank documents. Athena has an intelligent search engine at its core and employs natural language processing techniques, automated optical character recognition and translation capabilities that help reduce manual tasks for supervisory assessments. In the future Athena will further exploit the power of large language models to provide summarisation and question-and-answer capabilities.

Another example is Heimdall, a custom-made tool for fit and proper assessments that has been in use since June 2022. Heimdall streamlines and enhances assessments through automatic machine reading of banks’ fit and proper questionnaires, supported by automatic translation, textual analysis, process automation and data analytics capabilities. This helps to improve the quality of assessments, as the manual workload is further reduced and supervisors can focus more on complex cases.

These two tools are complementing core systems such as IMAS, the Information Management System, which has grown together with European banking supervision. IMAS is tailor-made to serve the ecosystem of supervisors and supervised entities alike, digitalizing their interactions, enhancing data quality, and increasing transparency and efficiency. Together with its reporting database IDRA, which offers end-user reports, data extraction reports and dynamic reporting capabilities, IMAS and IDRA cover the entire supervisory cycle end-to-end and support thousands of staff in conducting supervision every day.

Way forward and a successful conference

Looking ahead, key questions that need to be answered include how these suptech tools can remain future-proof and deliver lasting benefits for the supervisors using them and how we can ensure convenient and easy access to technology and sustain a culture that continues to encourage innovation.

These and many other questions were discussed at the ECB’s fourth Supervision Innovators Conference on 20 and 21 September 2023. Over 1,200 innovators from supervisory and regulatory institutions, the private sector and academia from across the world joined the event to exchange views on generative artificial intelligence (AI), the future of supervision, digital transformation and innovation, technological development and many related topics.

“Digitalisation has brought about seismic shifts in the banking sector, reshaping the very fabric of financial services.”, said Supervisory Board Chair Andrea Enria in his opening remarks and referred to a significant switch of the customer base to digital banking and the rise of AI-based banking services. It has therefore become an increasing focus of supervision during his term in office and has transformed ECB Banking Supervision. It is crucial for the ECB to continue investing in its own digital transformation if it wants to maintain effective and efficient supervision and respond to the challenges and opportunities arising from digitalisation in the banking sector.

But what does this digital age, marked by rapid technological disruptions and an avalanche of information, mean for us? Keynote speaker Axel Schell, Chief Technology Officer at Allianz Technology, called on supervisors to overcome linear thinking in response to the rapid pace of technological progress and the unprecedented influx of information. The ECB, for its part, aims to keep up with technological progress through “Supervision at your fingertips” – a vision in which supervisors are able to access a real-time picture of the banks they supervise in just a few clicks, combining the powers of technology, data and innovation. These three areas are closely interlinked and will form the cornerstones of the new SSM Digital Strategy 2024-2028.

It is essential to continue providing advanced technology to all users at the ECB and the national supervisory authorities, develop cutting-edge capabilities to address new challenges and tasks and stay at the forefront of digitalisation, thereby making the SSM future-proof, ECB Supervisory Board member Elizabeth McCaul emphasized in her speech. The ECB is working hard to realise its vision of unlocking more of the potential of existing IT systems and suptech tools. The ECB’s goal is to enable supervisors to get the most out of the technology by nurturing an innovation culture through new partnerships, extending its digital training programme and continuing to explore new frontiers and technological trends.

Further key questions include how to ensure convenient and easy access to technology, what demands will be made of banking supervision in the future, and how we can foster a culture of digital transformation and create an environment in which technological development and innovation can thrive. Experts from across the financial industry, academia and supervisory authorities exchanged views on these crucial questions and provided insights into further topics, such as large language models in banking supervision, changes in the banking sector and the future of banking, the culture of innovation, and supervisory reporting by banks.

On a more practical note, alongside discussions, participants also had the opportunity to explore some of the suptech tools developed by the ECB and supervisory bodies from around the globe through engaging presentations and demonstrations in interactive virtual sessions. This was considered by many participants one of the highlights of the conference.

The next Supervision Innovators Conference is scheduled for September 2024.