HKMA sets out the high-level principles on the use of artificial intelligence based on sound industry practices and similar principles formulated by the leading overseas authorities. These principles have been set out in a recent letter that was issued to the Chief Executives of all authorized institutions. Banks are expected to take these principles into account when designing and adopting their artificial intelligence and big data analytics applications.
The twelve principles cover aspects related to governance, application design and development, and ongoing monitoring and maintenance. The principles convey the importance of using data of good quality, conducting rigorous model validation, ensuring an appropriate level of explainability of artificial intelligence applications, ensuring auditability of artificial intelligence applications, implementing effective management oversight of third-party vendors, and implementing effective cyber-security measures. Banks may apply the principles in a proportionate manner that reflects the nature of their artificial intelligence applications and the level of risks involved. As international regulatory standards and industry developments regarding the use of artificial intelligence are evolving rapidly, HKMA will keep these principles under periodic review and provide further guidance to banks as and when appropriate. HKMA plans to issue a separate guidance on the principles relating to consumer protection aspects involved in the use of artificial intelligence applications.
HKMA also conducted a survey, in the third quarter of 2019, on the use of artificial intelligence by banks. It is noted that many banks are adopting or planning to adopt artificial intelligence applications. The scope of the use of artificial intelligence is also expanding from customer-facing services (for example, chatbots and personalized marketing) to internal processes and risk management areas (for example, operational automation, cyber risk, and fraud risk management). Details of the survey results will be published soon.
Keywords: Asia Pacific, Banking, Artificial Intelligence, Big Data, Fintech, Guidance, Cyber Risk, HKMA
Previous ArticleRBI Announces Opening of First Cohort under Regulatory Sandbox
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.