Financial regulators are increasingly turning to technology to improve oversight and address risks within the banking sector. Supervisory technology, or SupTech, refers to the tools adopted by authorities to strengthen supervision, manage data, and monitor compliance in real time. Using advancements such as artificial intelligence, machine learning, and blockchain, SupTech enables faster detection of financial crime and system vulnerabilities. Unlike RegTech, which is used by financial institutions to meet compliance requirements, SupTech supports the regulatory bodies themselves. Authorities such as the European Central Bank (ECB) and the Central Bank of Brazil have implemented SupTech solutions to streamline tasks and improve the accuracy of supervisory assessments, as shown by tools like Athena and Heimdall, which assist in processing and analyzing large volumes of banking information.
Recent research has confirmed SupTech’s effectiveness in promoting accurate risk disclosure and improving credit quality in banks, with limited negative effects on broader economic activity. Studies also suggest that SupTech contributes to stronger alignment between supervisory goals and banks’ internal practices. Institutions are recognizing the need to integrate SupTech into core supervision strategies. The ECB’s ongoing efforts include developing a unified approach that combines IT systems with SupTech tools and focuses on usability to encourage adoption across supervisory teams. SupTech continues to gain traction as a valuable asset in financial regulation.
