Techforward Award: European Central Bank

The rapid increase in the amount of available data, computing power and the fast adoption of new technologies are transforming the global financial landscape more than ever. But technology has created both opportunities and challenges for supervised entities and supervisors.

In response to this, the European Central Bank (ECB) – in conjunction with members of the Single Supervisory Mechanism (SSM) – have created a digitalisation blueprint for European banking supervision. The blueprint provides a long-term action plan covering projects and enabling factors that are likely to foster digitalisation and the use of advanced technologies in the region.

The blueprint was created by supervision and information technology teams from the ECB and national competent authorities in the SSM. Working together, they have developed an innovation management framework to identify, assess and prioritise technological development that is likely to bring benefits to banking supervisors.

During the assessment process, they analysed more than 120 potential application ideas; end-users and key experts were also involved to evaluate ideas in terms of ease of implementation and business value.

“We looked at the supervisory cycle and how supervisors conduct certain processes and address bottlenecks,” Daniela Schackis explains. “One of the key goals was to be user-centric and so we analysed the impact of what each technology application would be. There were some obvious quick wins”.

Just over 20 key applications were identified and these will drive the digital agenda of the SSM over the next few years. These 20 projects are at the core of the blueprint and are clustered around six impact areas: smart and user-centric IT systems; advanced data analytics tools that draw on large and integrated datasets; superior textual analysis services; processes that should be increasingly automated; further digitalisation of supervisory reporting; and digital collaboration tools.

Among the applications identified is a powerful platform for natural language processing (NLP) applications, a virtual lab that will provide a modular platform for digital collaboration and data exchange, and a machine reading tool for questionnaires submitted by banks for the assessment of their board member appointments.

“We identified that NLP would be useful in a number of areas,” Magí Clavé says. “Start-ups and big tech companies have been engaged in three NLP proofs of concept, which will be finalised in July. We will then evaluate the results to see if there is scope for a minimal viable product.”

The blueprint further defines key enabling factors. This includes the establishment of a digitalisation training programme. The training has been offered to staff beyond the SSM’s development teams – 100 IT and supervision experts were invited to partake in a 6-week artificial intelligence programme that will be extended to additional 500 people.

“We even had requests from the ECB’s supervisory board to receive the training,” explains Pentti Hakkarainen. “We have therefore acquired an academic partner to provide the training for this level of people”. 

Hakkarainen stressed that, while the central bank could hire people with relevant skill sets from the private sector, it was also important to have the skills internally ingrained. “People should not be afraid of new technologies,” he says.

The project has also resulted in the establishment of the Steering Committee digital agenda, which so far has facilitated discussion on digital strategic matters; a SuperVision Innovators Forum, connecting all relevant IT and supervision experts across the SSM; and a supervisory technology hub at the ECB that fosters the adoption of innovative technologies.