Bank of England takes another step towards embracing DLT, RegTech
The firms the Bank of England’s FinTech Accelerator would be working with in the latest cohort of proofs of concept include Chain, Digital Reasoning, Mindbridge Analytics, NTT Data and Reportix.
The future work of Bank of England’s FinTech Accelerator will focus on machine learning, data storage and analysis, as well as distributed ledger technologies. This was made clear by a speech delivered today by Andrew Hauser, Executive Director for Banking, Payments and Financial Resilience.
Mr Hauser announced a further cohort of four Proofs of Concept today.
The most recent DLT PoC, which was unveiled today will be done with Chain, It is designed to examine a major tradeoff in DLT design. The desirable resilience characteristics of DLT require sharing data on the ledger across a number, or all, network participants. But a fully replicated ledger entails certain privacy issues, and may be vulnerable to a cyber attack on whichever is the weakest link. The PoC will explore the extent to which DLT based systems can be configured to enable privacy amongst participants, whilst keeping data on a shared ledger.
With regard to RegTech solutions based on machine learning, BoE will collaborate with Mindbridge Analytics. The firm has already conducted a PoC with the Bank of England. That collaboration aimed to detect anomalies in anonymised regulatory data from credit unions. The PoC combined conventional data science techniques with a feature allowing users to flag items as suspicious or safe, permitting the program to ‘learn’ from the user which items could be of potentially more interest and adjusting its risk scores accordingly. Another PoC with the same firm was announced today. It will seek to expand these findings to larger and more diverse data sets, including transaction data, and a broader range of classification and machine learning algorithms.
Another PoC in the category of machine learning, also announced today is with Digital Reasoning. It will examine the extent to which analysis of the large quantities of weakly-structured textual data on regulated firms available from multiple public data sources can lead to insights on intent and sentiment. The PoC will look at whether those insights are capable of complementing analysis of more formal data reporting.
Regarding RegTech solutions for data storage and analysis, another PoC, which was announced by the BoE today will be done with NTT Data and Reportix. It will explore ways of storing, organising and combining the Bank’s regulatory and analytical data in a more flexible or ‘multi-dimensional’ way based on the XBRL standard, rather than the current ‘form-centric’ (or tabular) format. Improving the storage of data in this way would allow the BoE to make broader connections between data sets, and will help it analyse and visualise trends in new ways.
The areas of focus of the latest PoCs fit well with those of the preceding cohort, announced in July this year. Those PoCs covered areas of work, such as: analysis of large-scale supervisory data sets; executing high-value payments across currencies and borders; identifying and applying cross-cutting legal themes from regulatory enforcement actions; and measuring performance on the Bank’s internal projects portfolio.