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HKMA releases Artificial Intelligence in banking report

The Hong Kong Institute for Monetary and Financial Research (HKIMR), the research arm of the Hong Kong Academy of Finance (AoF), on 21 August 2020, released its second Applied Research report, titled “Artificial Intelligence in Banking: The Changing Landscape in Compliance and Supervision”.

HKIMR Applied Research reports are released on topics that are highly relevant to the financial industry and regulators in Hong Kong, and they aim to provide insights on the long-term development strategy and direction of Hong Kong’s financial industry.

This report is part of a research project on the adoption of artificial intelligence (AI) in banking, carried out in collaboration with the Hong Kong Monetary Authority (HKMA) and other collaborators. It aims to assess the current status of AI adoption in the Hong Kong banking industry and its implications for banking compliance and supervision.

The first part of the report assesses the current status of AI adoption in the Hong Kong banking industry based on an industry-wide survey conducted by the HKMA, and the findings indicate that banks in Hong Kong have adopted AI in all key functional areas. Over 80% of participating banks view AI adoption as a way of improving efficiency and strengthening risk management. Banks are also optimistic about the prospects of using AI, with some 80% of survey respondents planning to increase investment in AI over the next 5 years.

The second part of the report provides useful insights about the risk management framework for banks adopting AI, the overarching principles guiding the supervision of AI adoption in banking and the development of AI-aided compliance and supervision (Regtech and Suptech). The Senior Executive Director of the HKMA and Deputy Chairman of the HKIMR stated, “we are delighted that the banking industry is adopting AI positively. We hope this report serves as a starting point towards understanding the implications of AI applications for the banking industry, especially for its compliance and supervision.

About the Hong Kong Academy of Finance (AoF)

The AoF is set up with full collaboration amongst the HKMA, the Securities and Futures Commission, the Insurance Authority and the Mandatory Provident Fund Schemes Authority. By bringing together the strengths of the industry, the regulatory community, professional bodies and the academia, it aims to serve as

  • a centre of excellence for developing financial leadership; and
  • a repository of knowledge in monetary and financial research, including applied research.

About the Hong Kong Institute for Monetary and Financial Research (HKIMR)

The HKIMR is the research arm of the AoF. Its main remit is to conduct research in the fields of monetary policy, banking and finance that are of strategic importance to Hong Kong and the Asia region. The Applied Research studies undertaken by the HKIMR are on topics that are highly relevant to the financial industry and regulators in Hong Kong, and they aim to provide insights on the long-term development strategy and direction of Hong Kong’s financial industry.

OpenGov Asia previously reported, in May 2020, that the HKIMR a report titled “Fintech Adoption and Innovation in the Hong Kong Banking Industry”.  It was the first in a series of Applied Research reports on topics that are highly relevant to the financial industry and regulators in Hong Kong, and they provide insights on the long-term development strategy and direction of Hong Kong’s financial industry.

The report stated that in recent years, waves of Fintech innovations, enabled by rapid developments in telecommunications and information technology, have led to an increasing degree of digitalisation and the emergence of various new technological applications and solutions in the global financial sector. Given their relative importance in Hong Kong’s financial sector and their integral role in intermediating funds for the economy, the effect of Fintech on banks’ business operations is expected to be of keen interest to the financial industry, regulators, and academia in Hong Kong.

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