Capacity Development for “Smart Supervision”

In a paper published last month, the Financial Stability Institute (FSI) sets forth a range of good practices through which financial supervisory authorities can enhance their technology-related capacity development (CD) in support of the shift toward “smart supervision.”

The paper — authored by the FSI’s Juan-Carlos Crisanto, Johannes Ehrentraud, Jermy Prenio, and Jeffery Yong — highlights the growing need for supervisors to understand and engage with emerging technologies such as AI and automation. It argues that authorities should implement structured CD frameworks aligned with institutional objectives, foster an innovation-friendly culture, and use competency frameworks to identify training needs.

“Authorities with an innovation-friendly culture will find staff who are technologically adaptable and open to embracing new technology responsibly to augment their capabilities and improve their efficiency,” the authors write. “An innovation-friendly culture requires promoting cross-functional collaboration and embedding innovation in organisational values.”

The paper argues that to address both the risks and the opportunities of technology, authorities must cultivate tech-savvy supervisors. This capacity is essential to support the ongoing work to develop “smart supervision,” which involves leveraging advanced technologies to further enhance oversight capabilities. The authors emphasize that the evolution toward technology-driven supervision requires that supervisory culture become more "pro-innovation and digital-first.”

To support this shift, the paper explains, CD delivery requires a multi-faceted approach, leveraging a combination of in-house and external training, secondments, research collaborations, and non-training knowledge-sharing initiatives. Authorities must then assess effectiveness through diverse methods, including pre- and post-training assessments, feedback mechanisms, and benchmarking, to ensure that the human and financial resource investments are commensurate with the outcomes.