MARKET

CONDUCT
SUPER(TECH)VISI N
9 JUNE 2022 | BANK INDONESIA SEMINAR
‘ NEW ERA FOR CONSUMER PROTECTION: USE OF
D I G I TA L I N N O V A T I O N ’

M A R I A L Ú C I A L E I TÃ O | H E A D O F T H E B A N K I N G
CO N D U C T S U P E R V I S I O N D E PA R T M E N T O F T H E
BANCO DE PORTUGAL AND CHAIR OF FINCONET
AGENDA
01 W H Y M A R K E T CO N D U C T S U P E R V I S I O N I S I M P O R TA N T

02 T H E BA N CO D E P O R T U G A L’ S A P P R OAC H TO M A R K E T CO N D U C T
SUPERVISION

03 T H E BA N CO D E P O R T U G A L’ S M A R K E T CO N D U C T S U P E R V I S I O N G O E S
D I G I TA L

04 T H E BA N CO D E P O R T U G A L’ S F I N A N C I A L E D U C AT I O N S T R AT E G Y

05 T H E BA N CO D E P O R T U G A L’ S S U P T E C H P R O J E C T S

06 F I N CO N E T W O R K O N S U P T E C H
WHY MARKET CONDUCT
SUPERVISION IS IMPORTANT

01
MARKET CONDUCT SUPERVISION | MAIN PURPOSE
Market conduct supervision aims to reduce information asymmetry and to foster a more balanced relationship
between financial service providers and consumers – from disclosure requirements to market practices

Provision of information to Conduct duties on credit

consumers institutions
• Technical competence
• Advertising • Diligence
• Pre-contractual information • Neutrality
• Contractual information • Loyalty
• Discretion
• Information provided
during the lifetime of the • Consideration of
contract consumers’ interests based
on a legal and regulatory
framework

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MARKET CONDUCT SUPERVISION | A COMPREHENSIVE APPROACH
The increased access to diversified and innovative retail banking products and services, fostered by rapid digital
innovation, requires a more comprehensive and intrusive market conduct supervision

Disclosure of Suitability
information

Sales Responsible
practices lending

Sales
Fees & charges
incentives

Product CONSUMER
Assistance oversight and PROTECTION
governance FRAMEWORK

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THE BANCO DE PORTUGAL’S APPROACH
TO MARKET CONDUCT SUPERVISION

02
2

• The Banco de Portugal is the business

conduct supervisor in charge of retail
banking markets: deposits, credit and
payment services

• This mandate is carried out through the

Banking Conduct Supervision Department

Money Museum
Headquarters
Central Bank of Portugal

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THE BANCO DE PORTUGAL’S APPROACH | POWERS

REGULATORY POWER • The Banco de Portugal has regulatory powers

over retail banking markets in specific matters
(e.g. disclosure of information)

• The Banco de Portugal is responsible for

overseeing compliance with the applicable
legal and regulatory framework and for
requiring the correction of irregularities

• The Banco de Portugal has also enforcement

powers and a mandate to sanction
irregularities (through administrative
ENFORCEMENT OVERSIGHT
proceedings)
POWER POWER

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MARKET CONDUCT SUPERVISION | ALSO ACTING ON DEMAND

Market conduct supervision also needs to focus on the demand side – consumers – to promote financial
inclusion and foster financial literacy

FINANCIAL INCLUSION
REGULATION FINANCIAL LITERACY

OVERSIGHT ENFORCEMENT

Informed and responsible access

Sound conduct from credit
to banking products and services
institutions
by consumers

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THE BANCO DE PORTUGAL’S APPROACH | THREE MAIN PILLARS

REGULATION SUPERVISION FINANCIAL

LITERACY

CONSTANT IMPROVEMENT OF THE LEGAL AND REGULATORY FRAMEWORK

MONITORING OF THE ACTIVITY OF INSTITUTIONS
SANCTIONING OF NON-COMPLIANCE
PROMOTION OF THE QUALITY OF DEMAND

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THE BANCO DE PORTUGAL’S
MARKET CONDUCT
SUPERVISION GOES DIGITAL

03
02
Market conduct supervision has to ensure
institutions’ compliance with the
applicable legal and regulatory framework
regardless of the channels used for the
delivery of financial products and services

The COVID-19 Pandemic has accelerated

the pace of technological adoption in
financial services

Market conduct supervisors shall be

ready to overcome the challenges
brought by digitalisation of financial
services

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TECHNOLOGICAL INNOVATION | THE BANCO DE PORTUGAL’S
APPROACH TO OVERCOME THE NEW CHALLENGES

2. 5.
1. 4.
Monitoring 3. Promoting
Tracking Ensuring
provision of Removing digital
technological technological
products and barriers financial
developments neutrality
services literacy

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 • In dialogue with the industry to understand the technological options and choices
1.
• With an active involvement in international fora (e.g.FinCoNet)
Tracking
• Promoting training and knowledge-sharing (multidisciplinary, agile teams)
technological
developments

 In 2017, the Banking Conduct Supervision

Department created a specific unit dedicated
to monitor the provision of products and
services through digital channels

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 2.
Monitoring 2018

provision of
products and
services

 In 2016 and 2018, the Banco de Portugal launched

surveys to the industry to monitor:
• Provision of digitalized services
• Levels of adoption and use of digital channels
• Growth prospects
• Limitations and obstacles for supply/demand
• Banking products and services being provided
• Security risks and risk mitigation mechanisms

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 • Aligning the regulatory framework with technological innovation
• Removing barriers without compromising security, information
3.
transparency and the rights of bank customers
Removing
barriers

 In 2017, the Banco de Portugal approved the

opening of bank deposit accounts by assisted
video conference

 The Banco de Portugal continuously evaluates other

innovative solutions in order to verify if they comply
with the required security level

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 4. “Same business, same risks, same rules, same supervision”
Ensuring
• Ensure the same level of consumer protection, irrespective of the channel of delivery
technological
neutrality

 In 2017, the Banco de Portugal

published a Circular Letter that
requires institutions to report
information on the provision of
consumer credit via digital channels

 In 2020, the Banco de Portugal

published Best Practices to the selling
of retail banking products through
digital channels
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 5.
Promoting
digital
financial
literacy

 The promotion of digital financial literacy became a

strategic goal included in the Banco de Portugal's
Strategic Plan for 2021-2025

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THE BANCO DE PORTUGAL’S
FINANCIAL LITERACY STRATEGY

04
THE BANCO DE PORTUGAL’S FINANCIAL LITERACY INITIATIVES

WITH THE THE BANCO DE

PORTUGUESE PORTUGAL’S
NATIONAL PLAN FOR OWN INITIATIVES
FINANCIAL
EDUCATION
THE PORTUGUESE NATIONAL PLAN FOR FINANCIAL EDUCATION

The Portuguese National Strategy on Financial Literacy:

• is led by the three financial supervisors

• with a long term commitment

• is a hub of initiatives from a wide range of stakeholders

• has different degrees of partnership with its stakeholders

• is revised every 5 years benchmarking international best practices

1ST WAVE 2ND WAVE 3RD WAVE

2011 – 2015 2016 – 2020 2021 – 2025

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THE PORTUGUESE NATIONAL PLAN FOR FINANCIAL EDUCATION

• Relies on the “Todos Contam” dedicated website with an e-

learning platform

• Publishes training contents, the Plan financial literacy

initiatives (including those conducted by the different
stakeholders) and e-learning courses with Moodle

• The financial supervisors and its strategic stakeholders

follow a comprehensive approach to reach specific target
groups (e.g. students, MSMEs, workers, vulnerable groups,…) Todos Contam website
https://www.todoscontam.pt
implemented through different steps

Drafting the Monitoring

Signing a Core Training of Preparing
and
Protocol Competencies trainers Materials
Framework Evaluation

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THE PORTUGUESE NATIONAL PLAN FOR FINANCIAL EDUCATION |2021-2025

 Addressing the challenges brought by the COVID-19

pandemic has adopted the following strategic dimensions

• Strengthening financial resilience

• Fostering digital financial literacy

• Contributing to sustainable finances

BY STRENGTHENING PARTNERSHIPS AND

GOING DIGITAL

NATIONAL PLAN FOR FINANCIAL EDUCATION 2021-2025

https://www.todoscontam.pt/pt-pt/orientacoes -estrategicas

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THE PORTUGUESE NATIONAL PLAN 2021-2025 |LINES OF ACTION

Line 1: Financial education in schools Line 5: Financial education for MSMEs

Line 2: Financial education in the workplace Line 6: Financial education for institutions
that support citizens

Line 3: Financial education through local

authorities Line 7: Awareness-raising campaigns
targeting young people

Line 4: Financial education for the employed

and unemployed Line 8: Traditional media campaigns

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THE BANCO DE PORTUGAL’S OWN INITIATIVES | CYBERSECURITY
CAMPAIGNS

Since 2016, the Banco de Portugal has

promoted online awareness-raising
campaigns regarding cybersecurity risks

• on the Banco de Portugal dedicated

website to banking conduct
supervision, the Bank Customer
Website and social media

• during specific annual events, such as

the European Cybersecurity Month, the
Internet Day or the Christmas season
Bank Customer Website
https://clientebancario.bportugal.pt/en/

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THE BANCO DE PORTUGAL’ S OWN INITIATIVES | STRONG CUSTOMER
AUTHENTICATION

The Banco de Portugal releases campaigns to

promote the awareness of strong customer
authentication procedures, drawing attention
Do you use a bank card
when shopping online?
to the adoption of safety procedures (two-
factor authentication) when paying online (e.g. Find out what changed on 31 December

e-commerce payments)
KNOW MORE

• on the Banco de Portugal´s Bank

Customer Website and on its Twitter and
Instagram pages

• on the main TV channels to reach the

general population Bank Customer Website
https://clientebancario.bportugal.pt/en/

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THE BANCO DE PORTUGAL’S OWN INITIATIVES | YOUNG PEOPLE

In 2018, the Banco de Portugal launched the

#toptip campaign for staying safer online
with tips to promote the safe use of digital
channels, aimed at secondary school students

• on the Bank Customer Website and social

media

• brochures distributed to every school and

schools’ libraries

• awareness-raising sessions in schools

across the country
5 tips for staying safer online #toptip
https://clientebancario.bportugal.pt/en/material/5-tips-staying-safer-online-toptip

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THE BANCO DE PORTUGAL’S OWN INITIATIVES | MIGRANTS

The Banco de Portugal has established a partnership with

the Portuguese High Commission for Migrations (ACM) to
promote the financial inclusion of migrant populations

• virtual training sessions for the migrant support

organisationson the process of opening a basic bank
account

• dissemination of leaflets on the basic bank account

(in Portuguese, English, French and Ukrainian)
through migrant support organisations

The Banco de Portugal encouraged institutions to provide

basic bank accounts to Ukrainian nationals displaced as a
consequence of the war

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THE BANCO DE PORTUGAL’S DIGITAL FINANCIAL LITERACY STRATEGY

The Banco de Portugal is developing a Strategy on Digital Financial Literacy, with the support of
the OECD and the European Commission

Oct-2022 > Jun-2023 mid-2023 onwards

Oct-2021 > Sep-2022 mid-2023 onwards
DESIGN IMPLEMENTATION
DIAGNOSIS Identification of contents, Initiatives to empower citizens EVALUATION
Identification of needs and target groups and delivery to avoid the risks of the Impact assessment of the
priority target groups channels digitalisation initiatives

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THE BANCO DE PORTUGAL’S SUPTECH PROJECTS

05
 NEW CHALLENGES REQUIRE INNOVATIVE SOLUTIONS

Strong customer authentication

Cibersecurity risk
and awareness campaigns

Solutions
Disclosure inconsistencies and
Promote effective disclosure
complexity of products

New providers Adapt the regulatory perimeter

New products, technologies and

Challenges

Innovation hubs
channels

Lack of digital literacy and risk

Digital information and literacy
of financial exclusion

Increase in cross border International cooperation and

transactions share of information

Adoption of new supervisory

tools and skills needed
Suptech tools and training

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WHY IS SUPTECH IMPORTANT ?

In a digitally changing environment, market conduct supervisors

should act in a timely and effective way, adopting efficient
processes and solutions

SupTech tools bring value-added to business conduct

supervision:

• faster collection and selection of relevant information

• deal with large amounts of data

• automate processes and procedures

• increase operational efficiency

Market conduct supervision is a data-driven task

Millions of customers, millions of contracts… millions of data!

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SUPTECH IMPLEMENTATION |KEY TOPICS

CHALLENGES
PREREQUISITES SUCCESS FACTORS
• Time needed to train the tool
• Identify supervisory needs • Conduct a pilot exercise
• Data’s standardisation, quality and
• Define of SupTech strategy with • Identification of risks and availability
clear objectives mitigation measures
• Resources and expertise
• Mobilise skills, resources and • Involvement of business and IT
• Adaptation of legacy systems and
technologies experts interoperability

• Ongoing evaluation of the

• Fairness/bias
tool’s performance
• Risk of failure or over-relying on the
Suptech tool
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SUPTECH | A STRATEGIC PRIORITY FOR THE BANCO DE
PORTUGAL
In 2019, the Banco de Portugal set up the Innovation Lab
(inov # ) to catalyse an innovative mindset and to support
decision making

After a brainstorming session between the Banking Conduct

Supervision Department and the Innovation Lab, potential
SupTech tools were identified to improve business conduct
supervision

Draft credit agreements

validation

Information requests
classification and response

Monitoring of advertisement
@ digital channels

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SUPTECH | A STRATEGIC PRIORITY FOR THE BANCO DE
PORTUGAL
Draft credit
agreements validation
and
Information requests
classification and Draft credit
response agreements
(implementation) validation
(in production)

Monitoring of
advertisement @
digital channels
(under
consideration)

Information
Information
requests
Draft credit requests
classification
agreements classification
and response
validation and response
(pilot)
(pilot) (in production)

2019 2020 JULY SEPTEMBER JUNE >> 2022

2021 2021 2022
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 DRAFT CREDIT AGREEMENTS VALIDATION |FORMER PROCESS

Since 2010, institutions have to report all draft consumer

and mortgage credit agreements to the Banco de Portugal
The Banco de Portugal
All (new and modified) draft credit agreements are filed and
receives over 300 draft credit
stored in a database manually agreements/year related to
new products introduced in
The Banco de Portugal oversees the compliance of those draft
the market, and over 1000
credit agreements with legal and regulatory requirements changes to draft credit
agreements for existing
A risk based approach is followed due to the large amount of
products
data

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 DRAFT CREDIT AGREEMENTS VALIDATION |CHALLENGES

Such a large volume of draft credit agreements raises

several challenges

• Significant number of human resources

• Need to prioritise

• Real time monitoring and oversight not possible

• Time-consuming task increases human error

The manual oversight of draft credit agreements

for rules validation is a very time consuming task

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 DRAFT CREDIT AGREEMENTS VALIDATION |PILOT

The Banco de Portugal implemented a SupTech

tool pilot to automate the task of draft credit
agreements validation

It focused on the validation of a set of rules with

a relatively low level of complexity (20 % of all
requirements checked manually) and in one type of
credit (personal loans)

The pilot was run for 3 months and partnered with

a third-party vendor

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 DRAFT CREDIT AGREEMENTS VALIDATION | IMPLEMENTATION

The implementation of the project started in The SupTech Tool

January 2021 and finished in September 2021 High Level Architecture

The tool will gradually include almost all

regulatory requirements for all types of
consumer and mortgage credit contracts

Since September 2021, all draft credit agreements

are stored automatically through an interface
between the internal reporting channel and the
SupTech tool
The tool incorporates Natural Language
Processing and Machine Learning

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 DRAFT CREDIT AGREEMENTS VALIDATION | FRONT OFFICE

Draft Credit Agreements

The Banco de Portugal has developed
an application to support the
List of draft agreements in force analysis of draft credit agreements

User experience tests were conducted

with staff to present the new tool and
its functioning in a user friendly way

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 DRAFT CREDIT AGREEMENTS VALIDATION | FRONT OFFICE

Draft Credit Agreements Machine Validation

Validation of the draft agreement

Edit validation Save Agree with
Human Validation (legal experts)
the machine

Examples of validation:
List of requirements
Machine validation says the requirement is fulfilled

Human validation says the requirement is fulfilled

Machine validation says the requirement is not fulfilled

Human validation says the requirement is not fulfilled

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 DRAFT CREDIT AGREEMENTS VALIDATION | FIRST EXERCISE

In May, we performed a draft credit agreements

validation’s exercise of 15 draft car loans
reported by 3 credit institutions

For example, regarding 3 legal requirements,

the results of the machine’s validation (in the
table) were confirmed by the Human
Validation

The results of the Suptech

tool seem promising!

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 INFORMATION REQUESTS |FORMER PROCESS

Human intervention needed in all phases

01 02 03 04 05
RECEPTION SORTING AND VA L I D AT I O N L E G A L A N A LY S I S SEND THE RESPONSE
C L A S S I F I C AT I O N AND
>6.000 according to the CONCLUSION
information
subject
requests/year

Received by: E-mail;

Bank Customer Website
Follows a specific
form; Electronic
pre-defined template
Complaints Book; Letter
whenever possible

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 INFORMATION REQUESTS |PILOT

Creation of a Suptech tool to automatically collect

the petitioner's data (name, email address and
background requests), classify (assign a scope) and
submit a proposal for a response

This application automates some phases of the

information request processing, improving their
management efficiency

The tool was trained based on the history of treated

information requests

The pilot was run for 3 months and partnered with a

third-party vendor

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 INFORMATION REQUESTS | IMPLEMENTATION

RECEPTION SORTING AND SORTING AND P R E PA R AT I O N RESPONSE SEND THE

C L A S S I F I C AT I O N C L A S S I F I C AT I O N O F A U T O M AT I C VA L I D AT I O N RESPONSE
Filling in data VA L I D AT I O N RESPONSE
Background research

The tool incorporates Machine Learning

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 INFORMATION REQUESTS | FRONT OFFICE

Automatic
response Proposal

Validation

The programming of the retraining allows the tool’s development to produce more accurate results

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SUPTECH TOOLS | ADVANTAGES AND CHALLENGES

ADVANTAGES CHALLENGES

• Reduction of human intervention • Integration with legacy systems

• Improving efficiency of the process • Interoperability

• Higher speed of analysis • Need to update and train the tool - “Learn by Doing”

• Enhanced analytical capabilities • Transposition of legal requirements into concrete

programmable rules (codes) and setting parameters
• Better data visualisation
• Adequate resources, skills and technology
• Enhanced supervisor’s user-experience

• Faster and more effective market conduct supervision

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FINCONET WORK ON SUPTECH

06
FINCONET | WORK ON SUPTECH

SupTech has been on FinCoNet’s PoW since its AGM in

Jakarta (OJK) in 2016

A new Standing Committee (SC4) was set up to focus on the

use and application of SupTech by market conduct
supervisors

SC4 was chaired by the Banco de España with

representatives from Australia, Brazil, Canada, Germany,
Indonesia, Japan, Mauritius, Portugal, Russia, South Africa
and Spain
FinCoNet AGM – 2016, Jakarta – Indonesia

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FINCONET | RELEASED TWO REPORTS ON SUPTECH

The first report (2018) identified practices and tools

required to support risk-based supervision in the
Digital Age

A second report (2020) built on case studies and

responses to a survey conducted regarding SupTech
tools for market conduct supervisors

SC4 also coordinated with the World Bank, carrying

out a peer review of each other’s reports on SupTech

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FINCONET | CURRENT WORK ON SUPTECH

• SC4 is now developing a follow-up report on ‘Oversight challenges and

evolution in approaches for conduct supervisors in the context of
COVID-19, including use of SupTech oversight tools’

• The report will build on the answers from 19 jurisdictions to a

questionnaire fielded in June-July 2021

SC4 is chaired by the FCA Canada, with representatives from the AMF
(Québec, Canada), Central Bank of Brazil, FSA (Indonesia), Bank
Indonesia, Bank of Mauritius, FSA (Japan), Central Bank of Ireland,
AMF (Netherlands), FCA (UK), Central Bank of Portugal, Bank of Spain,
SBS (Peru), Central Bank of the UAE

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FINCONET | ACKNOWLEDGES SUPTECH STRATEGIC ROLE

The COVID-19 pandemic triggered or accelerated the enhancement of SupTech

tools

Market conduct supervision is envisioned as more proactive and preventive,

which has to be achieved by comprehensive, data-driven and active market
monitoring

Market conduct supervision will undergo important

transformations

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ABOUT FINCONET

Established in 2013, FinCoNet is an international organisation for market conduct supervisors with
responsibility for financial consumer protection

FinCoNet promotes sound market conduct and strong consumer protection through efficient and
effective financial market conduct supervision

FinCoNet is a member-driven organisation, with over 30 supervisors from around the world

FinCoNet is supported by the OECD as Secretariat, and structures its work through a number of Standing
Committees. Each SC focuses on a specific supervisory challenge or issue, and explores and promotes
best practices for market conduct supervisors

For more information, please visit: www.finconet.org

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THANK YOU
M A R I A L Ú C I A L E I TÃ O | H E A D O F T H E
BANKING CONDUCT SUPERVISION
D E PA R T M E N T O F T H E B A N C O D E
PORTUGAL AND CHAIR OF FINCONET
mlleitao@bportugal.pt