HKMA announces strategic initiatives to facilitate GenAI adoption

HKMA, the banking sector regulatory body in Hong Kong, seemingly recognizes the transformative potential of technologies like artificial intelligence (AI) and generative AI and is actively working to foster their adoption in the banking sector. As part of the HKMA’s strategic approach to AI and GenAI, its most recent initiatives come in the form of the launch of a GenAI sandbox and the publication of guiding principles for use of GenAI in customer-facing applications.

GenAI sandbox. The recently launched GenAI sandbox is aimed to empower banks to pilot their novel GenAI use cases within a risk-managed framework, supported by essential technical assistance and targeted supervisory feedback. Through interactive engagement with the industry, HKMA aims to draw insights from the GenAI Sandbox and share good practices, while keeping its existing guidance relevant and fit-for-purpose. HKMA encourages banks to make full use of this resource to unlock the power of GenAI in enhancing effective risk management, anti-fraud efforts, and customer experience. The HKMA’s GenAI Sandbox was launched at "FiNETech2", an event that encourages fintech-related innovation and collaboration, and is being promoted in collaboration with the Hong Kong Cyberport Management Company Limited, a digital technology incubator wholly owned by the Hong Kong Special Administrative Region government. Details of the sandbox, including eligibility criteria and application process, are expected to be announced soon.

Guiding principles for GenAI. HKMA also set out a set of guiding principles to be used by the authorized institutions for the use of GenAI in customer-facing applications. Since HKMA deems GenAI to be a subfield of big data analytics and artificial intelligence (BDAI), HKMA expects all authorized institutions to apply and extend the 2019 BDAI Guiding Principles to the use of GenAI and continue to adopt a risk-based approach commensurate with the risks involved. In addition, HKMA set out the following principles to ensure that appropriate safeguards for consumer protection are in place when GenAI is adopted for customer-facing applications:

• Governance and Accountability. Institutions should clearly define the scope of their GenAI applications, establish proper policies and procedures for the responsible use of GenAI, and ensure that GenAI models are adequately validated.

• Fairness. GenAI models should produce objective, consistent, ethical, and fair outcomes to customers.

• Transparency and Disclosure. Institutions should provide customers with an appropriate level of transparency regarding their GenAI applications.

• Data Privacy and Protection. Institutions should implement effective protection measures to safeguard customer data.