The first-year edition of the foundational course of the EU Supervisory Digital Finance Academy (“the Academy”) provides its participants with the fundamental knowledge of on the main areas of digital finance, as well as with the essential practical skills that will enable effective supervision of the application of digital technologies in finance by credit and financial institutions and supervisors’ use of technology by supervisors (SupTech).

The course – the cornerstone of the Academy – aims at enhancing the supervisory convergence across the internal market while supporting the transition toward a competitive, digital EU financial sector.

The structure of the foundational training course rests on three building blocks.

First, the sessions focus on technological advances and the development of new business models driven by the uses of new technology in financial products and services. These sessions explore the main technologies in digital finance, including AI, Big Data, and Distributed Ledger Technology (DLT). The sessions focus on the challenges and risks stemming from the use of these technologies in the markets, but as well as on the new opportunities, in particular from a consumer perspective (choice and convenience), and their application in RegTech and SupTech solutions.

Second, the sessions comprise the policy block, they follow the most recent regulatory response at the EU level and introduce the new regulatory instruments implementing the European Digital Finance Strategy, including the regulation of markets in crypto-assets (MiCA) and digital operational resilience (DORA), as well as guidelines published by the ESAs and delegated acts. These sessions include the discussion on regulatory and supervisory responses and the implications of the evolving regulatory framework on supervision.

Third, the practical block bridges and complements the knowledge and understanding of the new technology and regulatory and supervisory responses, to equip participants with a set of practical skills for supervision of digital finance in Europe by means of case studies and other practical exercises. The practical block will provide supervisors with the necessary skillset for operating within the new supervisory and oversight frameworks in digital finance.

The structure of the foundational training course follows a holistic and cross-sectoral approach covering financial institutions (including credit, insurance, and securities sectors) to ensure the learning journey is in line with the objectives of the Academy.

Session 1: Introduction – concepts, actors, business models, macro trends – a global perspective

The session presents a global overview of the impact of the current technological waves on the financial market. Looking at the main emerging technologies, risks, benefits and actors behind financial innovation, the session focuses on the tension between market-driven and regulation-driven innovation.

Session 2: Blockchain and DeFi

The session offers a foundational level of technological knowledge of blockchain/DLT and DeFi as well as an overview of use cases and trends across the sectors, focusing on DeFi as an enabling technology. The session aims to equip participants with the required knowledge to discuss the supervisory challenges stemming from the wide-spread use of technology-enabled financial services.

Session 3: Big data, artificial intelligence (AI), including machine learning (ML)

This session provides a non-technical introduction and outlook on Big Data and artificial intelligence (including amongst others, machine learning) applications in financial markets. First, it introduces the fundamental knowledge behind the technology applications. Second, it looks at the practical applications in different sectors and markets, such as credit scoring, anti-money laundering and countering the financing of terrorism (AML/CFT), robo-advisors, insurance pricing and insurance claims management.

Session 4: Technology-driven change and finance: comparative case study (technology-driven innovation and business models)

The objective of this session is to enhance the knowledge and understanding of the material learnt in session 1 and sessions 2 – 3 by deep diving into examples and illustrations of new business models and technological innovation in the financial sector. The cases explore specific risks and opportunities arising in different modes of application of digital technology in the financial sector from a macro and micro perspective, looking at horizontal risk factors, and using a sector lens of analysis for each case study to have a holistic view of the phenomena.

Session 5: Cyber security and digital operational resilience

This session provides a global overview of the challenges of cyber security and operational resilience in the context of digital finance. Key technological factors are examined and complemented by examples from the recent cases of cyber-attacks and disruptions affecting business continuity both at the level of individual financial service providers and infrastructure level. Systemic risk implications will be briefly explored.

Session 6: Digital operational resilience (DORA)

The session focuses on the elements and implementation of DORA in the EU. The session analyses the key elements, instruments, and potential implications of the new framework. The discussion in the session focuses on the challenges for the approach of financial institutions and supervisors, the required changes in supervisory approach and practice in the areas that include ICT risk management framework, ICT-related incident reporting, and oversight of critical ICT third-party providers.

Session 7: Markets in crypto-assets (MiCA)

The session focuses on the new framework for markets in crypto-assets (MiCA Regulation) against the background of rapid technological development and diversification in crypto-asset use cases in the financial sector. The session explores the objectives of MiCA (including investor and consumer protection) and its core elements (the issuer and crypto-asset service provider regimes) to enable participants to understand the framework and how it fits in with existing sectoral measures.

Session 8: Regulatory and supervisory challenges in digital finance

The session focuses on the regulatory and supervisory challenges to financial innovation and possible technological applications in different areas. It discusses the new policy tools that aim at balancing the inevitable trade-off between market competition, security, consumer protection, and innovation. The aim of this session is to discuss the existing and emerging regulatory and supervisory approaches to technological and financial innovation capable of addressing the risks stemming from technology and new market actors. In the end, presenting a suptech case application on AML/KYC.

Session 9: Use cases and applications in supervisory practice

Building on the work on the comparative case study, the second group assignment puts participants in a real-life setting and tasks them with adopting supervisory decisions or identifying supervisory tools needed for such decisions, related to cyber risks and operational resilience or the framework for crypto assets under MiCA. The tasks and roles tailored to specific groups of participants, include situations of information asymmetry, forward-looking perspectives, and conflicting interests.

Session 10: Open finance – The future of Fintech

The session focuses on future regulatory challenges in developing open finance. B2B data sharing amongst financial intermediaries, for which the EU PSD2 framework provided a pioneering policy framework, constitutes one of the key components of the Digital Finance Strategy. The session discusses the opportunities and challenges of open finance and examine the most recent private and public sector initiatives, including the interaction between different private actors (BigTechs, Incumbents, and Fintechs) and regulatory bodies, the framing of the regulatory perimeter, and the design of a horizontal open finance framework.

Session 11: Group assignment – sandbox exercise

The third and final practical session tasks participants with acting in the context of innovation facilitators. Participants discuss a macro scenario that requests policy intervention to support financial innovation. The assignment aims to debate different instruments and initiatives that NCAs could establish to facilitate the development of the fintech market, such as innovation hubs, digital and regulatory sandboxes, etc.

Session 12: Trends and priorities in digital finance – a cross-sectoral perspective

The concluding session of the foundational course module draws on the key themes discussed throughout the course to provide participants with an expert outlook on future developments in digital finance. The session focuses on the issues of consumer protection and market integrity, the shifting role of supervisors in the context of fast-pacing technological change, and the evolving regulatory landscape.