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In today’s digital age, new data are being generated at an unprecedented and exponential pace. The question is no longer about whether or not to use artificial intelligence, but rather about how it can be used most effectively and responsibly. AI offers enormous opportunities, promising to drastically improve both the efficiency and quality of a wide variety of work-related processes. It can analyse vast amounts of data quickly and accurately, improve risk identification by detecting patterns in the data, support decision-making and automate repetitive tasks – all of which can enhance the work of banking supervisors. However, we also know that using AI entails risks which are not yet fully understood.
Banks are also facing the same dilemma. AI can improve the experience they offer their customers, increase their operational efficiency and strengthen their risk management processes. But challenges and risks abound as they seek to leverage AI’s capabilities – from data governance risks (concerning, for example, confidentiality and the reliability of training data) to emerging operational, model management and accountability risks. Banks are increasingly finding that, in order to remain competitive, they must embrace AI while delivering on their risk management responsibilities.
So what does all this mean for banking supervisors?
The short answer is that we must adopt a future-proof approach to understanding and using AI. We should use it to enhance our internal supervisory capabilities and gain greater insights into the risks facing supervised banks as they, in turn, also deploy AI. These risks are wide-ranging, affecting business models, governance frameworks, risk management processes and capital adequacy, as well as financial stability more broadly. Crucially, the role of ECB Banking Supervision is to ensure that banks remain safe and sound. It is not for us to dictate which business models banks adopt and which technologies they use. What we can do, however, is draw on the power of AI to decipher data, understand risks and speed up processes, freeing up more time for human analysis and judgement in an increasingly complex world.
At an early stage we recognised the need to embrace digital innovation and AI to make European banking supervision more efficient and effective. We introduced an ambitious digital agenda to enhance our analytical capabilities. We invested in a portfolio of supervisory technology (SupTech) applications to supervise a complex banking sector and manage an ever-expanding pool of data and tasks. And we focused on the people who would be using this technology – 14 applications and platforms have been developed in the past three years, serving more than 3,500 users across the ECB and the national supervisors....
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