01 December 2021

SSM's Hakkarainen:Reaping the benefits of supervisory technologies

12 months on from our first Supervision innovators conference seems like a good moment to take stock of what we have achieved, where things stand today, and where we are going next.

We have gained momentum and won broad support to move ahead with ambitious plans. Now, we are on the cusp of translating an excellent beginning into remarkable tangible benefits via the roll-out of dedicated supervisory technology (suptech) products like “Athena” – a platform using natural language processing technology to speed up textual analysis – to front-line supervisors across the Single Supervisory Mechanism (SSM).

We are now at the implementation phase, and we will increasingly take advantage of innovative new technology in our daily supervisory work.

I am confident that the swift progress we have seen will continue. We have a strong group of both supervisory and technology experts from national competent authorities (NCAs), national central banks (NCBs), and the European Central Bank (ECB), we are selecting the pipeline of priority projects carefully, and the leadership is determined to make those projects succeed.

Looking back – what we have achieved so far

Our structured effort to explore advanced technologies and apply them to banking supervision began two years ago. At that point, the SSM did not have a coordinated approach to technological advancement, and it was not considered a key priority in our collective supervisory work. This left room for duplication and prevented necessary scaling up to achieve SSM-wide benefits. Things are different today, and we are all fully aware that we cannot thrive without the shared use of modern technology.

In recognition of the need to pursue suptech consistently across the SSM, a suptech team was established at the ECB. In addition, the necessary governance structures were put in place to allow close collaboration between the ECB and NCAs. A Steering Committee consisting of Supervisory Board members was set up to provide high-level oversight of suptech across the whole SSM. This provides a basis for us to ensure that our suptech initiatives are sufficiently aligned across the system, and has built up our capacity to generate momentum.

On top of this, a new Supervision Innovators Forum has been created, providing a means for supervisors across the SSM to exchange knowledge. Building on the foundations of shared knowledge, dedicated multidisciplinary innovation teams were established to deliver on specific projects, utilising expertise from across NCAs, NCBs, and the ECB.

Our first major suptech milestone was setting out our vision for the future – the SSM Digitalisation Blueprint. This blueprint outlines a five-year action plan covering both the specific projects to be prioritised and the enabling factors that will allow us to achieve our goals.

To prioritise projects the SSM Digitalisation Blueprint deployed state-of-the-art methodology to map each possible use case against two dimensions: potential business value and ease of implementation. Priority was given to use cases that were of higher value and easier to implement. This assessment was carried out by mixed teams of supervisors, IT experts and data scientists from across the SSM.

Among the enabling factors set out in the blueprint, I find two to be particularly important.

First, we are making a sustained effort to foster a digital culture within the SSM. We have introduced a comprehensive digital training curriculum. For example, more than 500 supervisors across the SSM are currently participating in an introductory six-week training programme on artificial intelligence. This is just the first cohort, and we plan to further develop our training offer to meet the evolving needs of supervisors in this domain.

Second, we recognise the need to enhance our “innovation ecosystem” across the SSM. This is about extending our capacity to draw on the best technological ideas and collaborators from across the globe in our suptech thinking. In practice, we do this by organising and participating in global events and by reaching out to other supervisory authorities around the world to exchange knowledge.

To foster such an exchange of knowledge, we have actively contributed to suptech discussions and publications in international fora such as the Bank for International Settlements, the Basel Committee on Banking Supervision and the Financial Stability Board. We have also conducted bilateral workshops with other supervisory authorities. As you can see, we have invited here today some of our colleagues from these authorities to give them a platform to present and share their experience.

The very fact that we are organising this conference for a second year in a row and the interest that it has generated is a testament to the value that experts from around the world see in connecting, sharing and collaborating. Our discussions at last year’s conference were mainly concerned with the beginning of a digital transformation process. This year we will focus more on how to move from ideas to implementation.

To sum up this retrospective part of my speech, the steps we have already taken have built a solid platform. This good start has also been recognised externally – with the ECB’s work on the SSM Digitalisation Blueprint receiving Central Banking’s “Techforward Award” for 2021. This award honours the most innovative activities of central banks and supervisors worldwide – and it is a testament to the good work that has been done so far.

Now – moving from exploration to implementation: reaping the first benefits of digital innovation

Having set up our suptech framework, we are moving beyond the exploration phase to implementation.

As we enter this new phase, it is clear that success will require suptech tools to be widely adopted in front-line supervision. For this to happen, certain essential tasks need to be performed.

We must give our staff the opportunity to build skills they need to operate current and future suptech tools. This must be complemented by building awareness of the benefits that the various suptech tools bring, and of the need to rely on them by integrating their use into workflows. As they grow in confidence, the teams using a particular tool will be able to take ownership of its maintenance and development.

Our efforts to foster a digital culture are supporting this confidence-building effort, and we are beginning to see the rewards. A number of front-line business areas have already volunteered to take ownership of the tools that are most relevant to their work.

Another task relates to the smooth integration of the new tools into our IT infrastructure. Building tools that will work well on each of the IT systems that exist across the various SSM authorities remains a challenge. In the long run, it will be necessary to move towards a more integrated IT infrastructure. Progress is being made in this direction, but it will not happen overnight. Meanwhile, we remain determined to find solutions that will work today, utilising the IT infrastructure we have.

A further challenge is that many of the potential technological innovations from which we could benefit rely on having sufficient data. The big data infrastructure that underpins our organisations is already impressive, but, in some instances, it cannot yet meet the enhanced demands of modern analytical innovations.

As supervisors, we are all aware of the benefits of supervisory technology, and I am positive that we can achieve success in our digitalisation work.

The production and system-wide roll-out of value-adding suptech tools are already underway for front-line supervisors.

Let me give you a couple of examples.

First, we have the SSM Information Management System (IMAS) Portal. The IMAS Portal serves as the gateway to the SSM, enabling supervised institutions to trigger supervisory procedures online. The portal replaces an email-based procedure, providing traceability and standardisation and opening the door to further digitalisation. So far, more than 1,000 procedures have been launched and almost 6,000 messages have been exchanged with supervised entities via the portal.

In addition, we have established SSMnet as the meeting point for learning and knowledge sharing throughout the SSM. Particularly in the current coronavirus (COVID-19) pandemic, SSMnet meets the supervisory need for a user-friendly and interconnected digital environment for teams working remotely. It also fosters pan-European cooperation and brings even more consistency to SSM banking supervision. More than 2,300 supervisors access SSMnet every month, showing the potential for further benefit from the tool in the future.

Of course, we will not stop there. As part of the implementation of the SSM Digitalisation Blueprint, we are working on a number of promising projects that are progressing swiftly through their testing stages.

For instance, the ECB Secretariat and the SSM Secretariat are working closely together on “Atlas”, a new digital solution for the decision-making process. This tool will support the preparation and follow-up of decision-making meetings, written procedures and delegated approvals.

Another example is “Navi”, a self-service platform based on a graph database with analytical and visualisation capabilities. This platform will help us gain insights from highly connected data and will be available to the SSM community and other European System of Central Bank (ESCB) functions.

We also aim to offer supervisors across the SSM a one-stop shop for prudential data analytics. To this end, we are working on “Agora”, a project that will facilitate supervisory analysis by gathering all supervisory data and master data, as well as other data relevant to supervision, in one place.

So, we are making remarkably good progress. Value-adding tools are beginning to be rolled out, and more are coming.....

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