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
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News
    News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7481