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

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681