The next big thing in regtech
Regulation has traditionally been approached from the position of hindsight, but regulators are starting to eye technology that allows them to gauge emerging risks
It is an assessment made by EY principal and financial services regulator leader Eugène Goyne. He was one of the lead authors in the global consultant’s Bank Regulatory Outlook report.
“We are not in the world of Minority Report,” he said, referring to the critically acclaimed action blockbuster about a futuristic world where law enforcement can nab criminals before they have actually committed the crime.
“We do have to be realistic about the value of what predictive risk indicators. But regulation has traditionally been a game of hindsight. Now in 2020, regulators are starting to think about what value they can get from predictive data.”
While financial services regulators are not yet at the point of deploying predictive analytical suptech applications, Goyne said they are now interested in their potential applications.
This might include identifying possible areas of heightened prudential or systemic risk, for example in terms of credit exposures or misaligned asset prices.
“Another potential application could be in the identification of conduct issues, such as patterns of relationships that may be predictors of a higher risk of inappropriate market or corporate behaviour,” Goyne added.
“Over the next few years, we expect to see further interest from regulators in the use of these types of data analytics as they seek to manage evolving prudential, systemic and conduct risks.”
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