RegTech for regulators, a toolbox helping to prevent the next financial crisis

FinTech Circle

Our FIRE data format has been featured in FinTech Cirleā€™s article on how RegTechs can help regulators.

Regulators face similar problems, like the complexity and inter-connectedness of financial institutions, the increasing complexity of regulation and the lack of comparability of the reported data. Technology can help to solve this problems. Reporting is key for regulators to uphold their mandate of financial stability and prudential regulation and technology solutions especially regarding reporting are already used by regulators.

However, recent developments like the FIRE Data Format, developed by the UK RegTech startup SUADE and supported by the European Commission, are huge steps to help regulators to define a common specification for granular regulatory data. This standardisation will help regulators to compare and evaluate data of different financial institutions and therefore to make better informed decisions. But the data format is just one step, looking further into the future, real time reporting might be an even bigger step for regulators.

Collecting granular regulatory data, which is qualitative and quantitative comparable is one goal, using AI for analysing the reported data is another. This is a big opportunity for regulators to use technology to better identify risks and thus to intervene as early as necessary.

Another case for regulators to use RegTech is for compliance. There are already solutions helping financial institutions to measure compliance, however regulators should embrace financial institutions to use technology as regulators could use those tools in on-site inspections to evaluate the compliance of the relevant financial institution itself.

Besides compliance, the legal analysis of regulation is also an important use case for technology. As regulation is becoming even more and more complex, intelligent analysis tools can help to find answers to complex regulatory questions. Those tools can simplify the complexity of regulation and make the analysis more efficient.

RegTech itself will not prevent the next financial crisis, but using technology will make regulators better regulators.

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