Regulatory and Supervisory Technologies on the Financial Market: Current Practice and Challenges

Abstract

The main areas of use of regulatory (RegTech) and supervisory (SupTech) technologies on the financial market are summarized, their main advantages and risks are highlighted. Foreign and domestic experience in the application of supervisory technologies is analyzed, in particular, in the context of reporting management, prevention and counteraction to money laundering, data collection and processing for market analysis. The use of an “accelerator” as a SupTech tool is noted. Most SupTech initiatives and projects are still under development and are mainly related to reporting and data management. Regulators of developed countries were the first to create regulatory “sandboxes”. Given that the “sandboxes” require a significant financial contribution and sometimes changes to legislation, regulators promote the formation of mainly innovation centers rather than “sandboxes”. The tendencies of development of regulatory technologies are generalized. An analytical review of the global RegTech market shows the trend of steady growth in investment in RegTech, namely the number of transactions of more than $ 40 million, with a surge in 2019, which was due to increased investment in information security and changes in EU regulations on data protection. Areas in which the development of SupTech and RegTech may face key challenges are identified, namely infrastructure (financial resources, technical capacity, staff qualifications) and the legal framework. It is substantiated that regulatory and supervisory technologies are transforming the financial services industry, providing opportunities and challenges for central banks and financial institutions.