BIS report discusses AI governance at central banks

A recent report from the Bank for International Settlements (BIS) explores the rapidly evolving use of artificial intelligence (AI) by central banks. It also offers guidance on establishing robust AI governance frameworks and proposes a governance and risk management framework. While the report focuses primarily on central banks and supervisors, its implications extend significantly to commercial banks as well.

The report is the outcome of work conducted by BIS member central banks in the Americas within the Consultative Group on Risk Management (CGRM). It stresses the need for strong and proportionate governance to manage the unique risks and challenges associated with AI adoption. The report acknowledges the diverse use cases of AI in central banking and supervision, including automated data analysis, risk assessment, and market surveillance. It also mentions use cases wherein AI helps banks comply with regulatory requirements through automated reporting, fraud detection, and anti-money laundering (AML) checks. The report moves on to propose an adaptive governance framework and ten actions that have proven useful for central banks in the adoption of AI:

• Establish an interdisciplinary AI committee

• Define principles for responsible AI use

• Establish an AI framework and update existing guidance

• Maintain an AI tools inventory

• Map AI tools and stakeholders

• Perform a detailed assessment of risks and controls

• Perform regular monitoring

• Report anomalies and incidents

• Develop and improve workforce skills

• Perform ongoing reviews and adaptations to the framework
   

The BIS report, while directed at central banks, carries significant implications for commercial banks. Supervisors are increasingly expected to scrutinize banks' AI governance frameworks, and adhering to the report's principles could be crucial for meeting these expectations. Banks that effectively implement robust AI governance will be better positioned to leverage the benefits of AI while mitigating its inherent risks. This can lead to improved efficiency, enhanced customer service, and more effective risk management. Furthermore, banks must prioritize the ethical dimensions of AI, ensuring fairness, transparency, and accountability to maintain public trust.

The BIS report offers a valuable roadmap for both central banks/supervisors and commercial banks as they navigate the complexities of AI adoption. By embracing the principles of sound governance, these institutions can harness the transformative power of AI while mitigating its inherent risks and ensuring its responsible use in the financial sector.
 

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BIS report