Featured Product

    HKMA Report on Artificial Intelligence Application in Banking

    December 23, 2019

    HKMA published a report that examines the ways in which artificial intelligence is contributing to the reshaping of banking sector. This report is part of a series of publications on the study of the opportunities and challenges of applying artificial intelligence in the banking industry. The report presents findings of a study on the application of artificial intelligence in the banking sector in Hong Kong. HKMA had commissioned PwC to conduct this study in 2019. The report concludes that the basic building blocks, components, and techniques enabling artificial intelligence to support banking and other industries are now in place. However, the ongoing technical difficulties of harnessing artificial intelligence are now combined with other challenges, with the concept of "explainability" being one of the critical issues for financial institutions.

    The report first introduces concepts necessary to understand artificial intelligence from both business and technical perspectives. It looks at the most important components and techniques in current artificial intelligence development. Then, it analyzes key technologies enabling the adoption of the current wave of artificial intelligence and looks at the drivers for adoption of artificial intelligence in the banking industry, along with benefits and potential barriers to adoption. Next, the report provides an overview of artificial intelligence in the banking industry in Hong Kong, wherein it also also shares popular artificial intelligence solutions being implemented by banks globally and defines where Hong Kong is on the spectrum of artificial intelligence development. Finally, the report considers how to implement artificial intelligence and looks to the future and recommends ways in which different stakeholders can help develop Hong Kong into an Innovation hub for artificial intelligence. 

    The findings show that almost 90% of the surveyed retail banks have adopted or plan to adopt artificial intelligence applications. Although the basic building blocks, components, and techniques enabling artificial intelligence to support banking and other industries are in place, the ongoing technical difficulties of harnessing artificial intelligence are now combined with other challenges. These include user acceptability, finding and retaining expert talent, integrating newly enabled products and services into a well-established business strategy, and the "explainability" of models. The following are the key recommendations presented in the report:

    • Drafting guidelines on artificial intelligence risk management in consultation with working groups of banks and regulators would help to better manage regulatory compliance. With greater guidance, banks will become more confident and readier to apply artificial intelligence solutions.
    • Knowledge-sharing of tried and tested use cases across Hong Kong’s banking artificial intelligence community is essential. This should encompass success stories as well as stories of those that fell short, either technically or due to a lack of real demand. In this way, financial institutions in Hong Kong will be able to develop an industry-wide understanding of the rules of the road for this new technology. 

    This report is based on the findings of a survey conducted in August and September 2019 on 168 HKMA-registered banks. The report also presents the findings of research into academic and commercial publications on artificial intelligence covering economics, public policy, regulation, technology and public use cases, and interviews with a start-up, two fintech incubators, a research organization, and ten banks.

    Keywords: Asia Pacific, Hong Kong, Banking, Artificial Intelligence, Fintech, Regtech, Cyber Risk, HKMA

    Related Articles

    PRA Publishes Q&A on Property Valuation Requirements Under CRR

    PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.

    May 29, 2020 WebPage Regulatory News
    News

    IOSCO Consults on Outsourcing Principles for Operational Resilience

    IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.

    May 28, 2020 WebPage Regulatory News
    News

    MAS Consortium to Develop AI Fairness Metrics for Credit Scoring

    MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.

    May 28, 2020 WebPage Regulatory News

    BoE Updates Definitions for BTL Data Collection

    BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.

    May 28, 2020 WebPage Regulatory News
    News

    FSI Examines Financial Stability Implications of Payment Deferrals

    FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.

    May 28, 2020 WebPage Regulatory News
    News

    PRA Finalizes Policy on Prudent Person Principle Under Solvency II

    PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.

    May 27, 2020 WebPage Regulatory News
    News

    EBA on Extending Large Exposure Limits for French Systemic Banks

    EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).

    May 27, 2020 WebPage Regulatory News
    News

    ECB Highlights NPL Resolution as Key Policy Issue in Post-COVID Europe

    As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.

    May 27, 2020 WebPage Regulatory News
    News

    RBNZ Publishes Financial Stability Report for May 2020

    RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.

    May 27, 2020 WebPage Regulatory News
    News

    ECB Updates Guidance on Reporting of Securities Holdings Statistics

    ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).

    May 26, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5231