Superintendent of Financial Services Linda A. Lacewell today announced DFS’ first-ever techsprint, an initiative to convene regulators and industry stakeholders to work towards a common goal of Digital Regulatory Reporting (DRR), which aims to give regulators instant access to data provided by firms under their supervision. This effort comes in the context of a trend by global financial regulators to employ techsprints as a mechanism to rapidly prototype technology solutions to key supervisory problems.

The techsprint’s first area of focus is virtual currency companies due to their advanced digital capabilities operating in this space. This techsprint will be the first of its kind in the virtual currency space.

“The future of financial supervision is digital and needs to happen now,” said Superintendent of Financial Services Linda A. Lacewell. “With this first-ever techsprint series, the Department is making progress towards automating the reporting of financial and operational data by our regulated entities, enhancing collaboration between the Department and industry, and helping to foster a safer marketplace for the consumers who depend on it.”

In a fast-changing world, regulators need access to more immediate information about the financial and operational conditions of the firms they oversee. This has become ever more apparent during this year’s pandemic, in which reporting was delayed as a form of relief to the industry while financial regulators transitioned to digital examinations in lieu of onsite examinations due to social distancing requirements.

Today, financial institutions submit periodic reports to regulators – in some cases quarterly, and in some cases only annually. Many of these reports are transmitted in legacy formats, which are processed manually. The regulatory information captured sometimes suffers from data quality issues. By the time it has been reviewed, the data may be too stale to act on meaningfully.

DFS will collaborate with the Conference of State Bank Supervisors (CSBS) and the Alliance for Innovative Regulation (AIR) to produce the techsprint. As part of this collaboration, the partnership also intends to develop additional techsprints focused on other types of nonbank entities subject to financial regulation.

"AIR is delighted to work with DFS and CSBS on this mold-breaking techsprint tackling one of the most urgent challenges in financial regulation, especially in a time of pandemic -- how regulators can get more and better information about what's happening in the financial system, faster,” said Jo An Barefoot, CEO and Cofounder of AIR. “Digitized regulatory reporting can bring light into current blind spots and can enable data analysis through artificial intelligence. It's the future of financial regulation."

“CSBS is pleased to work with New York’s Department of Financial Services and the Alliance for Innovative Regulation on this initiative,” said CSBS President and CEO, John W. Ryan. “This techsprint is a great example of the state system’s commitment to flexible and timely access to data. The pandemic has emphasized how real-time data can empower the system.”

The techsprint will bring together teams of professionals from fintech and the virtual currency industry, their regulators, experts, and technologists working on regulatory compliance solutions. Over a period of days, each team will collaborate on a proposed solution. Those solutions may range from process improvements to a functional prototype of a reporting mechanism. Ultimately, DFS aims to leverage what is learned to develop a set of common standards and an open source technical framework for DRR that could be adopted by DFS and other regulatory agencies.

Design workshops are planned for this fall, with the techsprint itself anticipated to take place early in 2021.

Information about the techsprint can be found at dfs.ny.gov/next. Additional information and details will be added to the website as they become available.

Listen to Superintendent Lacewell’s interview with CEO and Cofounder of AIR Jo An Barefoot on the AIR website.

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