Strategically Using Supervisory Tools

Strategically Using Supervisory Tools

Nombre de réponses : 29

As a DFS supervisor, you have many responsibilities. These include preserving the safety and soundness of financial service providers, protecting consumers (especially women and other vulnerable groups), achieving healthy competition, and ensuring that the financial system is not misused for criminal purposes.

You may also be supervising many incumbents and new entrants who offer innovative products. In this complex and evolving landscape, you need to juggle different responsibilities by using a variety of tools. These tools will help you optimise your supervisory capacity and enable you to apply a risk-based approach to supervision. A mix of supervisory tools is essential for effective risk-based supervision.

To paraphrase the Basel Committee on Banking Supervision (BCBS):

… supervisors should have access to and use an appropriate range of techniques and tools. These should help them implement an inclusive, risk-based approach to supervision that balances financial stability with inclusion, while allocating supervisory resources proportionate to the risk profile and systemic importance of providers.

In the following video, we explore some of the supervisory tools available to supervisors. 

 

 

If you have trouble playing this video, you can access an alternative player here.

Click to view the transcript.

Additional Reading 

To further your understanding of supervisory tools for risk-based supervision, we recommend you read the following publication from the Financial Conduct Authority (FCA):

Reflection Questions for Discussion

Here are more reflective questions. Please post your response using the forum functionality to share your insights and thoughts with your fellow students. 

  1. How can supervisors decide which combination of supervisory tools to apply when overseeing providers and the DFS market?
  2. What are the advantages of combining institution-focused and market-focused supervision in the DFS context?
En réponse à Premier message

Re: Strategically Using Supervisory Tools

par Erah, Dominic Ose Erah, Group 1
1. Supervisors can decide which combination of tools to apply by assessing risk profile, size, complexity and potential impact of each provider and then selecting proportionate measures that address the most significant risks to consumers and financial stability
2. Combining institutions-focused and market focused supervision allows supervisors to address risks both at the individual provider level and across the wider DFS ecosystem thereby helping to detect issues, market conduct trends and emerging risks more effectively.
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Re: Strategically Using Supervisory Tools

par LEILAH ABDALAH MUBEYA, Group 6
1. Based on the supervisory plan which reflects the risk profiles of DFS providers derived from their complexity and market share supervisors may select an appropriate mix of tools to oversee both individual DFS providers and the broader market.
2. Combining institution focused and market focused supervision helps supervisors identify both provider specific and system wide risks, strengthen consumer protection, improve proportionality, and manage systemic risks while supporting safe innovation in the DFS market.
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Re: Strategically Using Supervisory Tools

par Khawaja Khair ud Din Khawaja, Group 5
1. Generally supervisors should have complete understanding of business model, size, operations and systemic importance of the providers, based on the assessment of providers, the supervisor can combine tools like off site supervision, onsite assessment, thematic reviews, focused reviews, supervisory meetings with board and management etc.
2. A combination of institution and market focused supervision could provide complete coverage of risks not only to specific institution but from overall industry as well. Though such combination emerging risks can be identified. Moreover, combined approach to su[perisvion results in finanical stability and effective protection of consumers.
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Re: Strategically Using Supervisory Tools

par Jemimah Precious Kuteesa , Group 4
1.The decision of which supervisory tools to apply depends on the objective being pursued, for example supervisors can prioritize use of business plan analysis and product approvals if the goal is to issue a license or authorize roll out of a new product. Tools may differ if the objective is scheduled or ongoing oversight activities.

2. Combining institution-focused and market-focused supervision provides a comprehensive view of risks in the market. Focusing on institutions enables supervisors share internal and governance controls for provider-specific risks. In order to curb broader risks that across providers, market-based supervision adds a holistic supervisory view to reduce impact of systemic risks should they occur.
En réponse à Jemimah Precious Kuteesa

Re: Strategically Using Supervisory Tools

par Agaba Albert Busingye Agaba, Group 4
1.The supervisors can decide on the supervisory tools to use by considering the business models, size of the DFS, level of technology and market complexity help identifying the supervisory tools to mitigate the type of risk.
2. For Supervisors to use a combination of Institution-focused and market-focused supervision, helps them understand specific risks that impact the big DFS and how the same risks impact the market and mitigation measures that could be used in the whole sector on the occurrence of the same risks.
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Re: Strategically Using Supervisory Tools

par Cosmas Ochieng Kungu, Group 3
the supervisors can decided the combination of tools to apply based on the availability of the tools, complexity of the market. The advantages of combining allows for flexibility and also comprehensive supervision of dfs
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Re: Strategically Using Supervisory Tools

par Mariam Nansubuga, Group 4
1. Supervisors can decide which combination of supervisory tools to apply by assessing risk profile, considering the business model used, the size, and potential risk for a given DFS provider.

2.Combining institution-focused and market-focused supervision ensures better management of systemic risk. Combining both approaches allows supervisors to trace institution-level vulnerabilities such as a major mobile money operator's liquidity stress alongside market-wide disruptions such as sudden reduction in number of mobile money agents.
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Re: Strategically Using Supervisory Tools

par Beyene Getenet Getu, Group 2
2. Combining institution-focused supervision and market-focused supervision creates a stronger, more holistic supervisory framework for Digital Financial Services (DFS). Each approach covers gaps the other cannot, and together they help supervisors manage risks in a rapidly evolving, technology-driven ecosystem. The main advantages of combining institutional-focused and market-focused supervisions are better consumer protection, improved financial stability, more efficient use of resources, stronger oversight of innovation, better competition and market conduct monitoring and greater inclusion and fairness in DFS.
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Re: Strategically Using Supervisory Tools

par Sarah Davinah Namata, Group 4
1. Supervisors can use a combination of supervisory tools to apply by conducting risk assessments of the DFS market. This includes identifying specific risks associated with each provider and choose tailored tools i.e onsite inspections and offsite monitoring.
2.Combining institution focused and market focused supervision provides a holistic view of risk, enhanced ability to detect systemic risks that affect a number of institutions.
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Re: Strategically Using Supervisory Tools

par Damaris Kasyoka Mwaniki, Group 3
1.Supervisors can decide which combination of supervisory tools to apply when overseeing providers and DFS by assessing the general risk profile of the DFS providers and the risk profile of the individual DFS providers themselves.
2.Combining institution focused and market focused supervision in the DFS context helps in comprehensive risk based supervision.
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Re: Strategically Using Supervisory Tools

par AISHA UMARU HADEJIA, Group 1
Supervisors choose their tools by first looking at the risks each DFS provider and the wider market present, then matching the level of oversight to those risks. High‑risk providers might need closer checks like on‑site inspections, while lower‑risk ones can be monitored through lighter measures such as reporting. The choice also depends on resources, policy goals like inclusion and consumer protection, and the need to adapt as risks change.
By combining institution‑focused supervision, which spots weaknesses in individual providers, with market‑focused supervision, which tracks broader trends and systemic issues, supervisors get a complete picture. This makes oversight more effective, helps protect consumers, and supports safe financial inclusion.
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Re: Strategically Using Supervisory Tools

par Lyonah Murungi Murungi, Group 4
1. Supervisors should select the appropriate tools by aligning them to each provider’s risk profile and the overall complexity of the DFS market.

2.Combining institution‑focused and market‑focused supervision gives supervisors a comprehensive view of emerging risks and supports stronger overall market stability.
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Re: Strategically Using Supervisory Tools

par Elsabet Assefa , Group 2
1. By using a risk-based approach: assess actual or emerging risks, risk appetite, and potential harm, group providers into flexible portfolios; apply intensive institution focused supervision off-site/on-site to high-risk providers, trigger market-focused tools like thematic reviews when harm appears across multiple providers; and adapt tools dynamically as business models or risks change.
2. Provides a comprehensive view of both individual providers and the overall market. Allows early detection of widespread issues through market monitoring. Enables comparison of practices across providers and identification of good/bad examples. Institution-focused findings inform market-wide thematic reviews, while market insights improve guidance and risk management for individual providers.
Supports agility, better regulation updates, and more effective harm prevention.
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Re: Strategically Using Supervisory Tools

par Benedict Muhiire Hamenya, Group 4
One of the significant advantages of combining institution-focused and market-focused supervision is that the use of market-focused supervision can inform how risks are assessed and mitigated with individual DFS providers in Uganda using Institution-focused supervision.
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Re: Strategically Using Supervisory Tools

par Sheena Rebecca Nantumbwe, Group 4
1.Supervisors use risk assessments to match supervisory tools to the level of risk in a way that higher-risk providers receive more intensive oversight like onsite examinations, while lower-risk ones are monitored with lighter approaches such as offsite reviews.

2.Using both institution-focused and market-focused supervision gives a fuller picture of risks, helping detect systemic issues early, ensure consistent standards, and strengthen consumer protection and financial stability.
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Re: Strategically Using Supervisory Tools

par Faith Fxentirimam Envuladu, Group 1
1. Supervisors choose their supervisory tool combinations through their evaluation of multiple decision factors. The first step requires them to evaluate all risks that exist within the DFS market including vulnerabilities to fraud and money laundering, and consumer protection threats. The second step requires them to assess provider capabilities through resource evaluation which must include all aspects of provider size, operational complexity and risk assessment. Supervisors need to evaluate both existing regulations and the particular requirements which these regulations establish for DFS providers. The final step requires them to observe DFS market operations together with provider performance before they make necessary adjustments to their supervisory methods according to monitoring outcomes.

2. The DFS system benefits from combined institution-focused and market-focused supervision because it provides multiple benefits. Supervisors use institution-focused supervision to evaluate the operational stability of DFS providers and their compliance with existing regulations. Supervisors use market-focused supervision to detect systemic risks and vulnerabilities which could develop throughout the entire DFS market. The combination of these methods enables supervisors to gain a complete understanding of DFS market risks which allows them to implement better risk mitigation strategies. The combination of both supervision approaches enables institutions to protect consumers while they develop new products and compete in the DFS market.
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Re: Strategically Using Supervisory Tools

par Michael Sserwanga Sserwanga, Group 4
Supervisors decide based on the risk profile of the individual providers as well as the market environment. Risk assessments are done which then inform the workplans, and hence the combination act as a guiding tool.

Higher risk or systemically important providers (Systematically important providers) may require intensive institution focused tools such as onsite inspections and continuous offsite monitoring, while lower risk entities may primarily be supervised through regulatory returns analysis and offsite reviews.

Combining institution focused and market-focused supervision is valuable in the DFS context due to the interconnectedness of the institutions. Institution focused supervision allows supervisors to assess internal controls and risk mitigation at the firm level while Market focused supervision, on the other hand, identifies systemic patterns, emerging risks, and harmful practices across the institutions which then acts as a self reinforcing system for the findings that are obtained by either kind of supervision
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Re: Strategically Using Supervisory Tools

par Basil Paul Buyondo, Group 4
1. Supervisors choose supervisory tools using a risk-based and proportional approach matching tools to the provider’s risk profile, market impact, and supervisory objectives. Supervisors evaluate inherent risks, residual risks and consumer protection risks.
2. Institution-focused supervision examines individual providers’ governance, capital, and risk controls and Market-focused supervision identifies system-wide risks, market conduct issues, and trends.
En réponse à Basil Paul Buyondo

Re: Strategically Using Supervisory Tools

par June Ruhweza, Group 3
1.Supervisors should choose supervisory tools based on a thorough risk assessment of both the overall DFS market and individual providers. The intensity of supervision should reflect factors such as the provider’s size, complexity, customer base, risk exposure, and quality of internal controls. Higher-risk providers or markets with greater potential for consumer harm require more intensive oversight.
2. Combining institution-focused and market-focused supervision helps supervisors identify both firm-level weaknesses and broader systemic risks. This approach strengthens early risk detection, improves consumer protection, supports efficient resource allocation, and enables more responsive regulation in the fast-evolving DFS environment.
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Re: Strategically Using Supervisory Tools

par Usman Bayero , Group 1
1. Supervisors should prioritize tools based on on entity's systemic impact and risk complexity. In Nigeria, this means applying intensive, data driven offiste monitoring for high volume payment service providers while using lighter thematic reviews or innovation hubs for emerging fintechs to balance financial stability.
2. Intergrating insititution-focused and market foucsed allows the regulator to catch both individual firm failures and broad systemic trends such as predatory lending or shared cloud outages. This Dual approac ensures that while DFS providers remail solvent, the entire ecosystem remains fair, transparent and resilient against consumer protection risks.
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Re: Strategically Using Supervisory Tools

par Elsabet Getachew Mulugeta, Group 2
1. Supervisors can decide combination of supervisory tools based on risk level, impact, quality of governance, compliance history, supervisory objective. The tools are applied cumulatively and escalated as needed. Risk plus Impact plus Control quality will be a mechanism to decide supervisory intensity and Tool mix.
2. the supervisor will be able to capture both micro prudential risk (entity specific) and macro/ market wide risk. will be able to have better systemic risk assessment.
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Re: Strategically Using Supervisory Tools

par Zedi Muyingo Muyingo, Group 4
Supervisors can first assess the nature, scale, and risk profile of both individual providers and the broader DFS market. Based on this assessment, supervisors may choose a mix of tools such as off-site monitoring, risk-based reporting, thematic reviews, on-site inspections, stress testing etc.., ensuring proportionality and flexibility.

For Q2, combining the 2 approaches enhances early detection of emerging threats, promotes consistent regulatory treatment across providers, and strengthens the overall financial stability and consumer confidence in the digital financial system.
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Re: Strategically Using Supervisory Tools

par Aliyu Mohammed, Group 1
Supervisors should assess the size, complexity and other peculiaries of the institutions to decide the right combination of tools to apply when overseeing providers and the market.
Combining institution-focused and market-focused supervision in the DFS context will allow supervisors a complete grasp of both micro and macro prudential issues which gives enhanced confidence in financial system stability and consumer protection.
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Re: Strategically Using Supervisory Tools

par KABIRU MUDASHIRU, Group 1
1. Supervisors can decide on the combination of tools based on the risk of the DFS market, the individual risk profile, and even the environment they operate in.

2. It allows the supervisor to take a well-informed decision, market-focused gives better insight into how the market affects individuals and how the activity of an individual affects the market. a situation that can be obvious when an individual DFS has greater market dominance.
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Re: Strategically Using Supervisory Tools

par Humza Nadeem Jami, Group 5
In Pakistan, the State Bank of Pakistan (SBP) must strategically balance its supervisory tools to manage Digital Financial Services (DFS) complexity. Because off-site monitoring inherently depends on the financial service providers' own reporting, SBP must rely on targeted on-site inspections for critical data validation and to test how internal controls actually operate in practice.
Furthermore, SBP effectively combines institution-focused and market-focused supervision through a dynamic feedback loop. SBP’s thematic reviews on digital frauds and ongoing assessments of call center resilience—focusing on KPIs, uptimes, and confidentiality—serve as powerful market-focused tools to assess sector-wide risks. The cross-cutting insights gained from these reviews directly inform and sharpen SBP’s institution-focused on-site inspections. This ensures that even with off-site data limitations, SBP can thoroughly validate controls at individual providers and maintain an agile, risk-based regulatory response.
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Re: Strategically Using Supervisory Tools

par Shabani Shabani , Group 6
1...The appropriate mixture of supervisory tools are based on the on risk assessment and supervisory plan, which is informed by the respective risk profiles of DFS providers and these risk profiles reflect factors such as business model, institutional complexity, scale of operations, institutional governance structures, and market share.
2...The Institution focused supervision enables assessment of provider's specific risks, conduct practices, governance, and compliance culture. On the other hand, the Markets focused supervision facilitates identification of cross cutting issues, emerging conduct risks, systemic vulnerabilities, and structural market concerns. Altogether, these approaches strengthen consumer protection outcomes, promote proportional supervision, mitigate systemic risks, and support responsible innovation within the DFS ecosystem.
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Re: Strategically Using Supervisory Tools

par Doreen Ninsiima, Group 4
1. They can do so by considering the supervisory plans after carrying out risk assessments that inform them of which supervisory tools to adopt.
2. This enables an all round comprehensive assessment of the risks that form the basis for risk based supervision.
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Re: Strategically Using Supervisory Tools

par Aboo Badhasa Aboma, Group 2
1. Supervisors select and combine tools by first conducting a risk assessment to determine the "net risk" of a provider, which factors in both the inherent risk of the business and the effectiveness of their internal controls. They then map these risks to specific policy goals, such as financial stability or consumer protection, to ensure the tool addresses the right objective. High-impact or high-probability providers typically receive Relationship Management (dedicated oversight), while lower-risk entities are managed through Team Supervision (thematic or desk-based reviews). The final combination often blends off-site monitoring (data analysis and reporting) with targeted on-site inspections to verify that digital systems and agent networks are functioning as reported.

2. Combining institution-focused and market-focused supervision provides a holistic view of the ecosystem, allowing supervisors to detect systemic risks that individual firm audits might miss, such as industry-wide cybersecurity vulnerabilities. It helps ensure a level playing field by applying "same activity, same risk" principles across diverse players like fintechs, telecoms, and traditional banks. This dual approach also improves proactivity, as market monitoring can identify emerging trends and "dark patterns" in consumer behavior before they lead to widespread institutional failure. Furthermore, it enhances regulatory agility, enabling supervisors to adjust rules for the entire market while maintaining specific "guardrails" for the most complex providers.
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Re: Strategically Using Supervisory Tools

par Sarim Ali, Group 5
1. Supervisors should base their choice of tools on the provider’s risk profile and overall market risk assessment. Higher-risk or systemically important providers may require intensive onsite supervision, while broader market risks may be better addressed through thematic reviews or targeted market monitoring.
2. Combining both approaches gives supervisors a more complete picture — institution-focused supervision identifies firm-specific weaknesses, while market-focused supervision detects systemic or cross-cutting risks. Together, they help supervisors respond more effectively to emerging risks and industry-wide issues.