(P18) RegTech: The Promise and Challenges of Automating Regulatory Oversight
David C. Donald, Professor and Executive Director of Centre for Financial Regulation and Economic Development, Faculty of Law, The Chinese University of Hong Kong
The converging trajectories of two developments has enabled the automation of certain regulatory activities in what is referred to as ‘RegTech’. On the one hand, case data and accumulated scholarship has enabled an evolution of regulatory oversight from principles-based to rule-based content. On the other, data analytics has advanced so rapidly that the complex pattern recognition necessary for applying rules to factual scenarios can be automated up to a certain point. This development presents promise in cost savings, volume of data that can be processed, and a potential level of regulatory objectivity hitherto obtained only with considerable difficultly. It also presents serious challenges: What level of autonomy should be granted to such automated agents performing regulatory tasks? How should the algorithms be structured to guide automated supervisory activity and achieve maximum fairness? Can sufficient human control be established within these models? Should this be accomplished by keeping human actors ‘in the loop’ or rather ‘on the loop’, and how will this affect the quality of the regulatory oversight in question? As regulators everywhere move toward such automated models, questions regarding rule of law and the quality of their basic structure and operation take on some urgency. The papers in this panel will address these pressing matters.