The REGTECH Book

Banking Supervision at a Crossroads – RegTech as the Regulators’ Toolbox

By Dr Tobias Bauerfeind¹ and Pascal Di Prima²

¹Associate, Ashurst LLP

²CEO and Co-Founder, Lexemo LLC

Digital is tomorrow’s battlefield for banks. While traditional credit institutions face enormous challenges and are suffering from a period of low interest rates along with simultaneously increasing costs and regulatory requirements, new FinTech companies hope to get a slice of the cake. Those FinTech companies plough through single segments and processes of traditional banking transactions more efficiently and with more agility than the old industry and are committed to achieving a leading role in financial markets.

In this context, agile technology does not have to be a threat to the financial industry but can help banks better understand and manage their risks. Therefore, RegTech companies can provide not only a more efficient way to report, monitor, and comply with prudential requirements but also a tool to strategically allocate, manage, and coordinate banking risks. With regard to banks, RegTech companies will help firms to automate compliance tasks and reduce risks associated with meeting reporting obligations by using analytic tools to intelligently mine existing big data sets and unlock their potential.

RegTech will be able to provide a new way of approaching regulation – for banks, as explained earlier, and also for banking supervision¹ itself. Within this framework, banking supervision can be ...