Regulators should see Artificial Intelligence as a valuable tool – Experts

Financial regulators should leverage Artificial Intelligence (AI) to enhance their risk management capabilities and address emerging challenges in the financial sector, experts say. As new technologies emerge, the World Bank indicates that regulators can stifle innovation if they impose strict regulations on new technologies or foster innovation in the financial sector if they take a proactive approach. However, there is an opportunity to harness innovation by shaping rules and standards for cooperation, interoperability, and competition, if regulators grow their knowledge and build their expertise. ALSO READ: How tech is poised to transform banking in Rwanda Experts note that the role of central banks and regulatory supervisors is to promote confidence and innovation, while ensuring that people are reasonably protected from risks and their trust safeguarded. This was discussed in a session titled “Building Resilience: Financial Stability in a Changing Landscape” during the National Bank of Rwanda’s 60 years celebration, marked on June 7. Babak Abbaszadeh, President and CEO of Toronto Centre, noted that financial supervisors lose when they don’t regard AI as a valuable tool, and that the focus should be on enhancing system efficiency and ensuring AI is utilised to detect instead of becoming a tool of fraud or cyber risk in general. “The better prepared you are, the better you can handle risks and deal with challenges. Technology and AI are tools that need to be harnessed effectively,” he said, adding that Covid-19 accelerated the disruptions being experienced with technologies, responding to consumer needs and demands. Abbaszadeh said these technologies bring many benefits including promotion of financial inclusion.However, he acknowledged that the risks involved need to be acknowledged and addressed in the right way, especially by further driving financial literacy. “There is a need for diverse space supervision where all sub-sectors of the financial sector are included. Not just the banking sector, not just the insurance sector, not just the pensions or capital markets, but a holistic view to better have relevance,” he added. ALSO READ: Rwanda bankers embrace tech at research summit Louis Kasekende, Executive Director, Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI), said that regulators and central bankers need some level of humility given that some of the regulated institutions are already ahead in terms of technology adoption. “There is a lot that we don’t know at the moment and in most cases, the institutions that we are regulating are ahead of us. We must accept that we will work with regulated institutions to get a better understanding.” Kasekende believes the promotion of new technologies should be done with caution and that upskilling and training will be key to prepare future central bankers to handle emerging developments in payment infrastructure both within and across countries. “We should not get to a point where we just rely on the technologies without human review.” Soraya Hakuziyaremye, Deputy Governor of NBR, said that the evolving role of central banks is shaped by the profound impact of the increasingly volatile and uncertain global macroeconomic environment, as well as the effects of technological advancement. Central banks play a critical role in adjusting regulations to safeguard the integrity and functionality of the financial ecosystem while supporting broader economic stability and growth, she added. Hakuziyaremye also mentioned the recently released research paper on Central Bank Digital Currency (CBDC) that examined the benefits, risks, and practicality of implementing it in the country, laying a solid foundation for Rwanda's future digital financial landscape.

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Regulators should see Artificial Intelligence as a valuable tool – Experts