HKMA Outlines Principles for Application of Artificial Intelligence
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 Article
RBNZ Publishes Financial Stability Report in November 2019Related Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.