Reaping the benefits of supervisory technologies
Speech by Pentti Hakkarainen, Member of the Supervisory Board of the ECB, Supervision innovators conference
Frankfurt am Main, 29 November 2021
I would like to begin by congratulating all of you on the collective success we have achieved so far and to stress the importance of continued cooperation.
12 months on from our first Supervision innovators conference seems like a good moment to take stock of what we have achieved, where things stand today, and where we are going next.
We have gained momentum and won broad support to move ahead with ambitious plans. Now, we are on the cusp of translating an excellent beginning into remarkable tangible benefits via the roll-out of dedicated supervisory technology (suptech) products like “Athena” – a platform using natural language processing technology to speed up textual analysis – to front-line supervisors across the Single Supervisory Mechanism (SSM).
We are now at the implementation phase, and we will increasingly take advantage of innovative new technology in our daily supervisory work.
I am confident that the swift progress we have seen will continue. We have a strong group of both supervisory and technology experts from national competent authorities (NCAs), national central banks (NCBs), and the European Central Bank (ECB), we are selecting the pipeline of priority projects carefully, and the leadership is determined to make those projects succeed.
Looking back – what we have achieved so far
Our structured effort to explore advanced technologies and apply them to banking supervision began two years ago. At that point, the SSM did not have a coordinated approach to technological advancement, and it was not considered a key priority in our collective supervisory work. This left room for duplication and prevented necessary scaling up to achieve SSM-wide benefits. Things are different today, and we are all fully aware that we cannot thrive without the shared use of modern technology.
In recognition of the need to pursue suptech consistently across the SSM, a suptech team was established at the ECB. In addition, the necessary governance structures were put in place to allow close collaboration between the ECB and NCAs. A Steering Committee consisting of Supervisory Board members was set up to provide high-level oversight of suptech across the whole SSM. This provides a basis for us to ensure that our suptech initiatives are sufficiently aligned across the system, and has built up our capacity to generate momentum.
On top of this, a new Supervision Innovators Forum has been created, providing a means for supervisors across the SSM to exchange knowledge. Building on the foundations of shared knowledge, dedicated multidisciplinary innovation teams were established to deliver on specific projects, utilising expertise from across NCAs, NCBs, and the ECB.
Our first major suptech milestone was setting out our vision for the future – the SSM Digitalisation Blueprint. This blueprint outlines a five-year action plan covering both the specific projects to be prioritised and the enabling factors that will allow us to achieve our goals.
To prioritise projects the SSM Digitalisation Blueprint deployed state-of-the-art methodology to map each possible use case against two dimensions: potential business value and ease of implementation. Priority was given to use cases that were of higher value and easier to implement. This assessment was carried out by mixed teams of supervisors, IT experts and data scientists from across the SSM.
Among the enabling factors set out in the blueprint, I find two to be particularly important.
First, we are making a sustained effort to foster a digital culture within the SSM. We have introduced a comprehensive digital training curriculum. For example, more than 500 supervisors across the SSM are currently participating in an introductory six-week training programme on artificial intelligence. This is just the first cohort, and we plan to further develop our training offer to meet the evolving needs of supervisors in this domain.
Second, we recognise the need to enhance our “innovation ecosystem” across the SSM. This is about extending our capacity to draw on the best technological ideas and collaborators from across the globe in our suptech thinking. In practice, we do this by organising and participating in global events and by reaching out to other supervisory authorities around the world to exchange knowledge.
To foster such an exchange of knowledge, we have actively contributed to suptech discussions and publications in international fora such as the Bank for International Settlements, the Basel Committee on Banking Supervision and the Financial Stability Board. We have also conducted bilateral workshops with other supervisory authorities. As you can see, we have invited here today some of our colleagues from these authorities to give them a platform to present and share their experience.
The very fact that we are organising this conference for a second year in a row and the interest that it has generated is a testament to the value that experts from around the world see in connecting, sharing and collaborating. Our discussions at last year’s conference were mainly concerned with the beginning of a digital transformation process. This year we will focus more on how to move from ideas to implementation.
To sum up this retrospective part of my speech, the steps we have already taken have built a solid platform. This good start has also been recognised externally – with the ECB’s work on the SSM Digitalisation Blueprint receiving Central Banking’s “Techforward Award” for 2021. This award honours the most innovative activities of central banks and supervisors worldwide – and it is a testament to the good work that has been done so far.
Now – moving from exploration to implementation: reaping the first benefits of digital innovation
Having set up our suptech framework, we are moving beyond the exploration phase to implementation.
As we enter this new phase, it is clear that success will require suptech tools to be widely adopted in front-line supervision. For this to happen, certain essential tasks need to be performed.
We must give our staff the opportunity to build skills they need to operate current and future suptech tools. This must be complemented by building awareness of the benefits that the various suptech tools bring, and of the need to rely on them by integrating their use into workflows. As they grow in confidence, the teams using a particular tool will be able to take ownership of its maintenance and development.
Our efforts to foster a digital culture are supporting this confidence-building effort, and we are beginning to see the rewards. A number of front-line business areas have already volunteered to take ownership of the tools that are most relevant to their work.
Another task relates to the smooth integration of the new tools into our IT infrastructure. Building tools that will work well on each of the IT systems that exist across the various SSM authorities remains a challenge. In the long run, it will be necessary to move towards a more integrated IT infrastructure. Progress is being made in this direction, but it will not happen overnight. Meanwhile, we remain determined to find solutions that will work today, utilising the IT infrastructure we have.
A further challenge is that many of the potential technological innovations from which we could benefit rely on having sufficient data. The big data infrastructure that underpins our organisations is already impressive, but, in some instances, it cannot yet meet the enhanced demands of modern analytical innovations.
As supervisors, we are all aware of the benefits of supervisory technology, and I am positive that we can achieve success in our digitalisation work.
The production and system-wide roll-out of value-adding suptech tools are already underway for front-line supervisors.
Let me give you a couple of examples.
First, we have the SSM Information Management System (IMAS) Portal. The IMAS Portal serves as the gateway to the SSM, enabling supervised institutions to trigger supervisory procedures online. The portal replaces an email-based procedure, providing traceability and standardisation and opening the door to further digitalisation. So far, more than 1,000 procedures have been launched and almost 6,000 messages have been exchanged with supervised entities via the portal.
In addition, we have established SSMnet as the meeting point for learning and knowledge sharing throughout the SSM. Particularly in the current coronavirus (COVID-19) pandemic, SSMnet meets the supervisory need for a user-friendly and interconnected digital environment for teams working remotely. It also fosters pan-European cooperation and brings even more consistency to SSM banking supervision. More than 2,300 supervisors access SSMnet every month, showing the potential for further benefit from the tool in the future.
Of course, we will not stop there. As part of the implementation of the SSM Digitalisation Blueprint, we are working on a number of promising projects that are progressing swiftly through their testing stages.
For instance, the ECB Secretariat and the SSM Secretariat are working closely together on “Atlas”, a new digital solution for the decision-making process. This tool will support the preparation and follow-up of decision-making meetings, written procedures and delegated approvals.
Another example is “Navi”, a self-service platform based on a graph database with analytical and visualisation capabilities. This platform will help us gain insights from highly connected data and will be available to the SSM community and other European System of Central Bank (ESCB) functions.
We also aim to offer supervisors across the SSM a one-stop shop for prudential data analytics. To this end, we are working on “Agora”, a project that will facilitate supervisory analysis by gathering all supervisory data and master data, as well as other data relevant to supervision, in one place.
So, we are making remarkably good progress. Value-adding tools are beginning to be rolled out, and more are coming.
In the final part of my speech, I will look ahead at what is coming next.
The future – deepening collaboration, integrating systems and overcoming challenges
The future is never certain. Nevertheless, when I look at the road ahead, I see that the SSM is well positioned to continue its progress in making supervisory technology work and incorporating it into the front-line activities of supervisors.
In this context, I would like to highlight three areas on which we will continue to focus.
First, we will continue to build our collective SSM-wide digital capacity through our collaborative working approach.
Our innovation teams have been very successful, and we intend to build on their success in the future. In particular, we plan to give more attention to projects with high business impact and system-wide relevance to be led or co-led by one or more national authorities. This “centres of excellence” approach has the potential to accelerate progress. It will allow the rich intellectual resources that exist across our workforces to be allocated efficiently for the common good.
We have learned from the pandemic that remote collaboration across the SSM on digital innovation can work well. Experts can join dedicated project teams without the need for physical relocation. To facilitate smooth collaboration, we will make increasing use of the Virtual Lab – building upon the more than 1,500 supervisors already using its various collaboration and coding modules.
This enhanced collaboration will boost our innovation capacity by increasing the potential size of the suptech project portfolio – and that will be good for all of us.
The second focus area will be further integration of the SSM by moving towards a common IT solutions. We recently conducted a comprehensive exercise to analyse the status of more than 20 IT systems relevant to supervision. As a result, we identified a need to strengthen connections between SSM IT systems. We have therefore set up a dedicated team to investigate the integration of new suptech tools into the existing ESCB/SSM IT systems landscape. This will contribute to better system integration (e.g. via application programming interfaces) with a view to developing a modular SSM IT landscape that allows effective collaboration and data sharing across the SSM.
Finally, at all levels, we need to continue to improve our data systems and to upskill digitally.
In the area of data, the Agora platform that I previously mentioned is just the start. Further improvements in data efficiency and accuracy will be made – delivered via more integrated reporting systems working from a single data dictionary.
As for digital skills, it is essential that every staff member has the opportunity to enhance their competence and knowledge of the relevant digital aspects of their profession. The adoption of more advanced technological approaches will continue to touch all of us – and this will happen more and more over time. To avoid falling behind, we must all keep learning. This does not mean that every one of us needs to be a technical expert. For many, it will be enough to simply have an open mind regarding the adoption and use of technology. Modern IT will become easier to use over time, as we are designing the tools to be as user-friendly and convenient as possible.
Fortunately – and I know I do not need to sell this point to this audience – these digital topics not only bring tangible benefits but also tend to be deeply fascinating.
Now let me conclude.
In my remarks, I have set out what has been achieved, where things stand now, and where we are heading next.
As a final word, and as a parting note from me personally as I approach the end of my mandate, let me end by emphasising that, to succeed, it is important to be solution-oriented, as there will be challenges to overcome. Our development work never stops and there is always potential for further improvement.
I am so happy that I had this opportunity to join all of you on this journey of ongoing technological transformation. It has been exciting and rewarding, and occasionally demanding, and I have always really appreciated your skills and determination to adopt digitalisation in our work. I wish you all every success in the tasks ahead.
Thank you for listening.