A recent report by the Bank for International Settlements (BIS) examines the increasing use of artificial intelligence (AI) by central banks and provides guidance on establishing effective AI governance frameworks. The report suggests a governance and risk management framework that, while primarily focused on central banks and supervisors, also holds significant implications for commercial banks.
The study is a result of efforts by BIS member central banks in the Americas through the Consultative Group on Risk Management (CGRM). It highlights the necessity for strong governance to manage risks associated with AI adoption. The report recognizes various AI applications in central banking and supervision, such as automated data analysis, risk assessment, market surveillance, regulatory compliance via automated reporting, fraud detection, and anti-money laundering checks.
To aid in AI adoption, the report proposes an adaptive governance framework along with ten actions beneficial for central banks:
1. Establish an interdisciplinary AI committee
2. Define principles for responsible AI use
3. Establish an AI framework and update existing guidance
4. Maintain an AI tools inventory
5. Map AI tools and stakeholders
6. Perform a detailed assessment of risks and controls
7. Perform regular monitoring
8. Report anomalies and incidents
9. Develop and improve workforce skills
10. Perform ongoing reviews and adaptations to the framework
While aimed at central banks, these recommendations are also relevant to commercial banks facing increased scrutiny over their AI governance frameworks from supervisors. Effective implementation of robust AI governance can help banks leverage AI benefits while mitigating its risks, leading to improved efficiency, customer service, and risk management.
The BIS report underscores the importance of prioritizing ethical dimensions in AI usage to ensure fairness, transparency, accountability, and public trust.
In summary, this BIS report serves as a valuable guide for both central banks/supervisors and commercial banks navigating the complexities of AI adoption in the financial sector.
