By Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said they are coming up with several rules relating to supervisory technology (Suptech) to ensure banks are well-prepared for any threats due to exposure.

Fonacier said Suptech – defined by the Basel Committee on Banking Supervision as the use of technologically enabled innovation to support central banks’ supervision – as a BSP framework is critical to pursuing proactive reforms that are aligned with global standards and best practices.

“Modesty aside, we are ahead when it comes to BSP framework – part of Suptech – and we’ve assembled a set of information which would help us in our decision making process and even for policy formulation as well,” said Fonacier.

These reforms include the adoption of the Surveillance Loop and Early Intervention Framework which according to a central bank report, involves the development of a banking sector resilience index and a vulnerability index. “All these initiatives are meant to help banks brace for potential vulnerabilities moving forward.”

Fonacier said both regulatory technology or Regtech and Suptech are pioneering measures adopted by the BSP. “We’ve been invited to several conferences by several international organizations to discuss Regtech and Suptech… we’re a global pioneer (and) we partnered with some Fintech (financial technology) companies to undertake Regtech and Suptech.” Regtech solutions will strengthen the BSP’s risk-based regulatory and supervisory activities, with RegTech for Regulators Accelerator or R2A as partner.

The Bank for International Settlements (BIS) in a report said right now, Suptech is both data collection and data analytics. “Within data collection, applications are used for supervisory reporting, data management and virtual assistance. Examples include the ability to pull data directly from banks’ IT systems, automated data validation and consolidation, and chatbots to answer consumer complaints while collecting information that could signal potential areas of concern,” the BIS explained.

Suptech in data analytics is used for market surveillance and misconduct analysis, said BIS, and these include “detecting insider trading activities, money laundering identification, monitoring supervised entities’ liquidity risks and forecasting housing market conditions.”

The central bank, which is recognized as a trailblazer in digital and technology-related policies with its virtual currency policy and IT security rules, said Regtech and Suptech are “next generation of digital supervision tools and techniques to improve the speed, quality, and comprehensiveness of information supporting targeted and risk-based decision-making by regulators.”

Fintechs have potential risks that the BSP need to watch out for, said Fonacier earlier, and they are responding by using the same technology. These “unforeseen hazards” are in credit, liquidity, market, operational and settlement risks, plus cybersecurity threats and systemic risks that the BSP is closely monitoring.

While there are no specific regulation on Fintechs, the BSP has a flexible “test and learn” approach which it refers to as a “regulatory sandbox.”

The BSP had estimated that for this year, the Fintech market in the Philippines could reach almost $6 billion, with 60 players tallied as of end-2017. It expects the industry to grow by 16.4 percent a year and by 2022, the Fintech market could be worth $10.5 billion here.