In a recent paper discussing the adoption of regtech and suptech solutions, the Asian Development Bank (ADB) advocated for an ecosystemic approach engaging all stakeholders: regulators, regulated entities, technologists, academics, and more.
While the use of technology for compliance and risk management is not new, the digitalization of the financial system requires that firms and regulators adopt newer and more sophisticated technologies to understand and manage emerging risks properly. The acceleration of this digitalization, particularly since the start of the covid pandemic, has made this ever more important.
However, these actors cannot go it alone. There must be a coordinated effort by all the above stakeholders to develop best principles and practices for harnessing the opportunities and managing the risks associated with these new technologies.
"An integrated regtech/suptech ecosystem allows robust risk-data management and reliable predictability, utilizing the micro-and macro-prudential regulatory framework," the paper says. "Through an interconnected ecosystem, regulators can ensure substantial visibility, obtain information regarding the firm culture, and be better informed on the safety and soundness of a financial institution."
In Starling's 2022 Compendium, Yoshiki Takeuchi, Deputy Secretary-General of the OECD, similarly supports stakeholder collaboration for the adoption of trustworthy AI to solve such business and risk management problems. "The international community must reinforce efforts to facilitate multilateral engagement on implementing trustworthy AI," Takeuchi writes. "We need the strength that comes from multilateralism." [Read more here]
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