How does Taiwan embrace supervision technology?

Entering the post-epidemic era, various financial institutions and companies have accelerated the pace of digitization. Therefore, the technical level required for supervision is greatly different from before. In particular, the supervision units must also transform simultaneously, so that there is a way to quickly manage through supervision technology. A changing market is no less important than other Fintech categories.

In 2021, under the leadership of the FCA's policies, Taiwan will build various digital supervision platforms step by step. With the establishment of these infrastructures, Taiwan has also begun to embrace supervision technology. Today Mark will show you about this important change. .

1. What is Regtech?

Regtech is a new term combining Regulation and Technology, which can be called supervision technology or legal compliance technology. Regulatory compliance and supervisory operations. The introduction of these new technologies will greatly reduce the original supervision costs, and achieve real-time monitoring and faster warning and crisis handling .

2. Application fields of supervision technology (Regtech)

The fields of supervision technology that can be applied in combination with different technologies are also quite diverse. Here are a few more popular directions.

1. Risk data integration and management:

Adopt encryption, unit-level security, data capture and data sharing technologies, or further use blockchain technology to improve the data management model of financial institutions and supervisory authorities, providing a more secure and efficient way of aggregation .

2. Make financial institutions more aware of internal management development:

Through cognitive computing and deep learning technology, the "supervision radar" can understand regulations, so that financial institutions will not touch the regulatory red line when trying new business models.

3. Modeling, situational analysis and forecasting:

Using machine learning, advanced analysis and new models to improve modeling and data analysis , supervisors can quickly obtain important observation indicators from a large amount of complex information and present them on visual monitoring instruments .

4. Monitoring behavior:

Using machine learning to analyze unstructured data allows regulators not only to monitor classified information (fixed fields), but also to combine unstructured data to greatly enhance the scope of monitoring .

*Note: Unstructured data means in the database: there are no fixed fields and no fixed format. For example: image files, voice files, graphic files, blockbuster text, etc.

5. Monitoring and interception of real-time transactions:

Use machine learning to monitor and predict real-time transactions, and warn or block possible risks.

6. Identification and confirmation:

Apply data mining, natural language processing, visual analysis and biometrics and other technologies to the digital identity verification mechanism to improve the efficiency of identity verification and reduce possible fraud or forgery .

3. How Taiwan Promotes Regulatory Technology (Regtech)

Taiwan is currently promoting digital supervision in three ways , mainly combining the financial peripheral units to build the infrastructure of digital supervision, and adding various technologies for application.

1. Pure online banking supervision system:

The Central Deposit Insurance Corporation developed a set of pure online banking supervision system, and connected with API to collect 2 types of supervision data of pure online banking, including real-time notification and regular declaration information.

● Automatic reporting mechanism for regular filing materials:
The pure online banking supervision system uses API interface , so that pure online banking can regularly report relevant information through automated methods. The reporting frequency includes daily, weekly, semi-monthly and monthly. For example: pure online banking needs to report real-time deposit information every day. , current reserve ratio, etc.

● Real-time liquidity alert monitoring mechanism:
When there is a deposit transaction that has not been executed for more than 10 minutes, or when the balance of the inter-bank business settlement guarantee account is insufficient, the system will automatically detect the abnormality and issue a warning notification, including supervisory agencies such as the Financial Supervisory Commission, the Central Bank, and the Central Depository. All supervisors will receive real-time notification messages through mobile phone text messages and emails, so that they can grasp the problem at the first time and take countermeasures.

● Build a new data warehousing system:
The data sources include the application materials stored in the pure online banking supervision system. At the same time, the materials downloaded from the single reporting window system of the Financial Regulatory Commission are also stored in this data warehouse. In terms of data management, the central depository will select more important data to build a data mart (Data Marts), and according to the needs of monitoring, it will use the visual data dashboard to produce the required analysis or reports to strengthen monitoring. Liquidity Risk.

2. Ticket digital supervision platform:

The digital supervision reporting mechanism for bill finance companies established by CHIPSC will provide automatic reporting by bill finance companies using APIs , online verification of data correctness , serialization of granular data from financial peripheral units , and visual supervision information and Establish a number of real-time and intelligent supervision functions such as real -time warning notifications , and mainly build two platforms: "Digital Supervision Reporting System" and "Supervision Analysis Portal Platform".

● Digital supervision reporting system:
Using API technology and introducing automatic data verification function, it can verify the correctness of data in real time, improve the declaration efficiency of bill financial companies and optimize the declaration quality .

● Supervision analysis portal platform:
In addition to interfacing with granular data such as the settlement and delivery of bills from the Chibo Clearing House, the credit extension of the Joint Collection Center, and the bonds of the OTC Center, it also connects the historical data of the single reporting window of the Financial Supervisory Commission Inspection Bureau and the sharing platform of the banking bureau. , using the visual dashboard technology , the competent authority can use the interactive multi-dimensional supervision analysis tool to fully present supervision-related information, use big data to manage market dynamics in real time , and establish real-time warning notices for important financial business risk indicators. To accurately grasp the risk status of individual securities financial companies, improve supervision efficiency.

3. Digital supervision declaration operations in the banking industry:

In addition to passively accepting reports from financial institutions, it can also actively capture data through the application programming interface API , and use artificial intelligence machine learning and big data analysis to achieve real-time supervision , which can effectively reduce the degree of potential risk impact, as well as prevent money laundering, anti-counterfeiting and anti-money laundering. Corruption, professional integrity and other aspects of the actual implementation of supervision measures, shaping a culture of integrity is also a link that banking authorities attach great importance to.

4. Challenges in Promoting Regtech

Compared with foreign development, Taiwan is still at an early stage of development and faces the following four challenges.

1. The current supervision resources are still insufficient:

The FSC currently has four business bureaus, of which the Inspection Bureau has about 276 staff members. Its main tasks are general and ad hoc financial inspections, but it is not responsible for the "daily supervision" of financial institutions. Due to limited human resources and supervisory fault tolerance In a low social atmosphere, how to enrich supervision resources is a key task at present.

2. The supervision culture needs to change:

The digital supervision reporting mechanism will be implemented in all banks and securities companies in the future. Therefore, the supervisory authority needs to embrace innovation and establish relevant regulations from top to bottom, so that the new system can be clearly implemented, and the functions and functions within the supervisory authority can be smoothly promoted. Cultural change .

3. How to effectively distribute the supervisory responsibilities of supervisors:

In the future, whether to allow different outsourced agencies to cooperate, supervise and restrain each other, or whether the supervisory agency, outsourced agencies and other third parties can divide and cooperate, so that the supervision function can be implemented more efficiently through outsourcing . This issue will become an important new supervision issue.

4. How to evaluate the supervision effect brought by the supervision technology plan:

Market mechanisms are complex and changeable, and it is difficult to apply a one-size-fits-all model, which is also difficult to predict risk, but if the scope of detection is narrowed, there are still some models that can be used, such as the insurance industry on the road in IFRS 17 Bulletin Later, it originally only looked at the capital adequacy ratio (RBC), and then gradually developed a number of observation indicators .

For these issues, perhaps we can learn from successful foreign models.

● Following the example of the United Kingdom, the priority is to promote the project of "Digital Supervision Declaration".

● Referring to the UK TechSprint mechanism <br class="smart">The FSC has also started to conduct co-creation and exchange activities such as the Supervision Technology Hackathon, widely consulted for supervision and legal compliance solutions , and adopted the questions from the competent authorities, industry, government and academia. Cross-domain cooperative problem-solving method, jointly explore innovative technical solutions to solve legal compliance and supervision problems.

●Wait and see the development of foreign supervision technology <br class="smart">For example: the Australian Prudential Regulation Authority, the Italian Central Bank, the European Central Bank, the UK Financial Conduct Authority, the Monetary Authority of Singapore, etc., are all implementing the digital supervision reporting mechanism. By means of digitalization and automation , the supervising agency will deliver the operation data to the supervising agency in a specific way. The innovations of these countries in digital supervision declaration include data standardization, rule conversion, declaration format, granularity of declaration data, data transmission, data accessibility and other fields.

5. The future development trend of supervision technology (Regtech)

1. Expand from data collection to data analysis:

In the future , data-based risk indicators can be embedded in all financial activities and commodities, so that the follow-up data analysis and integration can further improve supervision efficiency and results, and can also learn from foreign experience, such as Australia's formulation of consumer data rights system , or the Monetary Authority of Singapore has established a framework for data analysis systems and technology risk governance, all of which are protected by regulations to enhance the security and feasibility of data analysis.

2. From passive management to active prevention:

All data collection and analysis in the past were "remedial after the fact". In the future, supervision technology is expected to enable data analysis to achieve the effect of "pre-forecasting", so that the supervision agency or industry can identify possible risks through data analysis, and then To prevent before it happens, from passive backwardness to active prevention.

3. From reducing compliance costs to mitigating business risk losses:

When interfacing with the system of the industry, it is necessary to focus on the network security issues on the environment side and the hardware side. "From the server host to the data layer security planning, all must be reviewed one by one." And there are many systems and partners used by the industry. Similarly, how to ensure information security in the process of interfacing, such as firewalls, mobile footprints, etc., must be strictly required; in addition, the protection of personal information after data opening and information exchange is also the focus of supervision technology that cannot be ignored. Do a good job in information security In order to reduce the risk of business losses.

6. Mark's point of view

The development of Taiwan's supervision technology is very positive for Fintech industry and financial industry. In addition to effectively reducing the cost of legal compliance , it can further reduce the risks . Because Regtech is a governance method for supervising agencies to implement supervision power and improve management , and for supervising agencies, this is to prevent risks. Mark also believes that the large-scale adoption of supervision technology can also improve regulators' recognition of the nature of various technologies , and furthermore have more confidence in new financial technology services. In contrast, the pace of opening and adjustment of regulations will be faster.

The pace of Fintech has never stopped, and various new financial technologies and new products have been spawned. Therefore, for regulatory authorities, it is necessary to have deeper insight and connotation in order to grasp and supervise it. The development of the entire financial technology is more sound.