BSP to release regulations on the ethical use of AI in the financial sector

THE BANGKO SENTRAL ng Pilipinas (BSP) is looking to release regulations on financial institutions’ ethical use of artificial intelligence (AI) by this semester.

“Since we are adopting the risk-based approach to supervision, most of the risks associated with AI — I think 80-90% — are already covered by existing regulations. That’s why the forthcoming regulations that will be issued by the BSP will only cover untouched areas,” BSP Director for Technology Risk and Innovation Supervision Department Melchor T. Plabasan said in a speech at the Asian Banking & Finance and Insurance Asia Summit held on Tuesday.

He said the BSP’s existing regulations on technology risk management, cybersecurity risk management, and data privacy, among others, already cover most risks associated with the use of AI.

“The remaining 10% or 20% relates to ethical use of AI — how to manage bias, and probably more on the accuracy. Those are the untouched or uncovered areas… The specific AI regulations that you can expect from the BSP are generally more clarificatory,” Mr. Plabasan said.

“AI is really exciting because it entails a lot of innovative ideas, but we should not lose sight of the risks associated with AI… We all know that striking the right balance in the way we are harnessing the potential of AI and also managing the risks associated with AI is quite challenging.”

The new regulations will be out within this semester, the BSP official said.

“I think we will also touch on AI-assisted cybersecurity because when we issued our first regulations on cybersecurity, we have yet to encounter [this]. So, that will also be covered,” Mr. Plabasan told ����ý on the sidelines of the event.

The BSP official said in his speech that Philippine financial institutions are already using various AI technologies and solutions in their operations, based on a review conducted by the regulator last year.

The review’s findings will be included in a white paper that he presented at the summit, which the BSP will release to the industry soon, he said.

“Our financial institutions are already joining the AI revolution and are also excited to take advantage of the benefits of AI. A lot of them already have existing projects or are considering AI in their roadmap,” Mr. Plabasan said.

Some AI use cases in the Philippine financial sector include hyper-personalization to better address the needs of their customers, the assessment of clients’ creditworthiness via alternative data, and generative AI for customer service, he said.

“They are also using these to ensure seamless onboarding of clients. That’s why you would see that some digital banks are able to onboard clients in five to 10 minutes. Because of its capability to identify potentially suspicious transactions or out-of-pattern behaviors, it’s also used for management of AML (anti-money laundering) systems.”

Mr. Plabasan added that more than a third of Philippine financial institutions already have AI units comprised of data scientists and data engineers.

“Those that we surveyed are expecting increased profitability, primarily because of the improvement in the overall efficiency of their operations,” he said.

Financial institutions leveraging AI technologies must ensure their compliance with existing rules on technology and cybersecurity, Mr. Plabasan said. “And of course, so that we are able to strengthen the trust in the digital ecosystem, we will uphold human-centric values, particularly in AI strategies.”

“We should always prioritize AI solutions that are human-centric solutions associated with AI,” he said. “While there are a lot of groundbreaking benefits that can be reaped from the use of AI, we must always remember that AI is primarily driven by humans. AI needs the prompts, instructions of humans. It is humans that set the direction for AI.”

“The BSP is committed to fostering an enabling regulatory environment that would promote responsible use of AI, the trustworthiness, and the resilience of our digital finance ecosystem,” Mr. Plabasan said. — AMCS