ResTech: Innovative Technologies for Crisis Resolution

Abstract

The use of financial technologies (FinTech) by financial market participants fostered a discussion among public authorities on the use technologies for regulatory (RegTech) and supervisory (SupTech) purposes. This paper defines the concept and the scope of application of “resolution technology” (ResTech), i.e. the application of technologies: i) to support the work of resolution authorities in developing resolution plans and in the application of resolution tools to banks and financial firms; and ii) to allow financial firms to achieve better regulatory compliance.

This paper argues that the features and market dynamics of resolution differ from those of RegTech and SupTech: given the lack of private sector incentives to invest in R&D on how to resolve a firm’s crisis, resolution authorities are called on to do it. This paper identifies four main areas of ResTech: resolution planning, resolution execution, cross-border exchange of information and automated compliance for banks and financial firms. The adoption of big data architectures could transform resolution planning in a dynamic activity; in a similar vein, machine-learning algorithms could boost the application of existing resolution tools and support the determination of the resolution strategy.

This paper concludes that the benefits of ResTech need to be measured against the increased risks taken by technology adopters. In a technology-driven environment, resilient IT infrastructures and e-governance processes are essential to prevent operational, reputational and legal risks.

Keywords: ResTech, resolution, data collection, data analytics, innovation, big data, machine learning, resolution tools

JEL Classification: C88, C89, G20, G38, O31, O32