Technological innovation in bank supervision: How SupTech disciplines bank risk-taking by Hans Degryse, Cédric Huylebroek, Bernardus Van Doornik published by VOXEU (3/2025)
Regulators increasingly rely on supervisory technologies to enhance bank supervision, yet their potential to discipline risky bank behaviour remains unclear. Using unique data from the Central Bank of Brazil, this column shows that after a ‘SupTech’ event, banks disclose inconsistencies in their risk reporting and tighten credit to less creditworthy firms, effectively reducing risk-taking. This disciplining effect is driven by a moral suasion channel – SupTech enhances banks’ understanding of the regulator’s expectations and capabilities, leading to more conservative risk management. The findings provide valuable insights into the role of SupTech in regulatory enforcement and financial stability.
