Featured Product

    David Hardoon of MAS Examines Fintech as Solution for Risk Management

    May 15, 2019

    During the opening address at the Asia-Pacific Risk Management Council Q2 Meeting, Dr. David Hardoon, the Chief Data Officer of MAS, remarked on whether fintech and digital innovations could provide an ultimate solution for risk management. He also briefly elaborated on the three key risks—cyber-security, data privacy and protection, and unfair discrimination while using artificial intelligence—and the work being done at MAS to address these risks. He highlighted that MAS has employed greater use of data analytics for risk detection, has partnered with the industry to develop a set of principles to encourage responsible use of technologies, and has developed an Augmented Intelligence tool that automates the computation of key metrics for trade analysis.

    Mr. Hardoon highlighted that cyber risk remains a key risk that MAS and financial institutions in Singapore are closely monitoring. Given the highly interconnected financial system, borderless nature, and increasing complexity of cyber-attacks, it takes a concerted effort and close collaboration among stakeholders in the ecosystem to manage the risks and maintain cyber resilience. Apart from the planned issuance of a new MAS Notice on cyber hygiene requirements, MAS has recently consulted on proposed revisions to the Technology Risk Management Guidelines and Business Continuity Management Guidelines, which will serve to help financial institutions better manage cyber risk. Besides these regulatory efforts, MAS has also been taking a collaborative approach by partnering the industry to conduct cyber exercises, share cyber threat intelligence, and establish industry standards and guidance to promote cyber resilience.

    Regarding the risk of unfair discrimination, he added that increasing use of artificial intelligence) has given rise to the risk of “black boxes” in decision-making. Financial institutions are struggling to validate artificial-intelligence-based models that use continuous learning and adaptation as distinct from fixed parameters and historical back-testing. Regulators have started to detect cases where artificial-intelligence-based decision-making has led to systematic exclusion of certain demographics. When an artificial intelligence tool finds an empirical basis for discriminating by a combination of variables such as gender, ethnicity, religion, and nationality, say for a loan or insurance decision, the concern is how much of that empiricism is grounded in reality and how much of it is due to unobserved biases in society that the artificial intelligence is learning from. He suggested that encouraging safe, fair, and trustworthy innovation also means that ethical and responsible use of technology by every ecosystem player is key.

    In the area of artificial intelligence and data analytics, MAS has partnered with the industry to develop a set of principles to encourage responsible use of these technologies. These are known as the Fairness, Ethics, Accountability and Transparency (FEAT) principles. As financial institutions increasingly adopt technology to support business strategies and in risk management, the FEAT principles are intended to provide guidance on internal governance around data management and use of these technologies. Earlier this year, the InfoComm Media Development Authority (IMDA) also released Singapore’s Model Artificial Intelligence Governance Framework. This Model Framework is the first in Asia to provide detailed and readily implementable guidance to private-sector organizations to address key ethical and governance issues when deploying artificial intelligence solutions. This is another set of best practices that can be considered. 

    Finally, while discussing whether digital innovations have the potential to provide an ultimate solution for risk management, he described the work of MAS in the areas of artificial intelligence, data analytics, and risk detection. In the area of artificial intelligence and data analytics, the use of these technologies can assist in risk monitoring and management in various areas, such as anti-money laundering, fraud detection, internal compliance, and business or market risks. MAS has employed greater use of data analytics for risk detection and targeting, using suspicious transaction reports and other data sets. This has enabled MAS to identify suspicious fund flow networks more effectively and focus supervisory attention on networks of higher risk accounts, entities, or activities. MAS also developed Project Apollo, an Augmented Intelligence tool that automates the computation of key metrics for trade analysis and predicts the likelihood that an expert will opine that market manipulation has occurred. The use of this technology helps improve detection of market abuse. These are just a few examples of technology that the industry can also adopt to unlock insights—whether to sharpen the surveillance of risks or to transform the way work is done, opined Mr. Hardoon.

     

    Keywords: Asia Pacific, Singapore, Banking, Securities, Regtech, Fintech, Artificial Intelligence, FEAT Principles, AI Governance Framework, MAS

    Related Articles
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Publishes Risk Dashboard for Third Quarter of 2020

    EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro

    ECB concluded the public consultation on the introduction of a digital euro in EU.

    January 13, 2021 WebPage Regulatory News
    News

    ECB Finalizes Guide on Supervisory Approach to Bank Consolidation

    ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.

    January 12, 2021 WebPage Regulatory News
    News

    SRB Chair Outlines Work Priorities for 2021

    The SRB Chair Elke König published an article setting out work priorities for 2021.

    January 11, 2021 WebPage Regulatory News
    News

    FDIC Selects Companies to Compete in Final Phase of Tech Sprint

    FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.

    January 11, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6417