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Speech by José Miguel Almeida, CMVM Board Member at the closing of the CNSF Workshop on ‘Big Data’

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CNSF Workshop on ‘Big Data’

Closing Speech

14 December 2021

José Miguel Almeida

CMVM Management Board Member

Good afternoon,

Mr. Administrator of ASF, Professor Dr. Manuel Caldeira Cabral,

Mr. Director of Banco de Portugal, Dr. Hélder Rosalino,

Ladies and gentlemen,

I would like to begin by thanking the Insurance and Pension Funds Supervisory Authority for the invitation and for holding this meeting on artificial intelligence and ‘Big Data’. It is with great pleasure that on behalf of the CMVM, I join the works, seeking to contribute to this joint reflection, which is so important for all those present here, as regulators and supervisors.

That digitisation is transforming society, the economy and the financial sector is already a stock phrase. In our times, the pandemic only reinforced this observation. There are countless changes in business models and in the form of accessing financial services and this requires that everyone, companies, consumers, and regulators, acquire new skills on digital literacy, investment and continuous monitoring of the development of new technologies and their applications.

The phenomenon that has been highlighted in the scope of this technological transformation has undoubtedly been artificial intelligence, and I emphasise the techniques that use massive amounts of data and their analysis, labelled ‘Big Data’.

Artificial intelligence techniques are being used in areas such as asset management, algorithmic trading, fraud detection and loan operations, to name a few, which have righteously contributed to the growth of FinTech companies. For example, data from the European Financial Supervisory Authorities show that the volume of assets managed automatically or semi-automatically by robot-advisors, grew approximately from 10 billion euros to 90 billion euros between 2017 and 2021.

Regulators have also been increasingly resorting to artificial intelligence through solutions known as SupTech with a view to making their actions more consistent, efficient, and effective in monitoring and analysing the regulatory compliance of their supervised entities. It will not be possible to do it any differently. On the other hand, the very dynamics of the relationship between the supervised entities and the regulators benefit from this – as it is easier, faster, and more consistent – namely in favour of financial stability. We also know that the financial sector is no exception in its use in society.

One of the reasons for this strong growth in the use of artificial intelligence is the profusion of available data and more accessible computing power. The other reasons are related to the expectable opportunities of the use of artificial intelligence, namely, improving the efficiency of companies through cost reduction, better risk assessment, increased productivity, the construction of more individualised profiles, as well as improving the quality of services and products offered to consumers.

However, there are risks that can arise or be enhanced with the use of artificial intelligence, such as cybersecurity, reputational, lack of data quality and lack of transparency. Additionally, the lack of explicability of the processes of artificial intelligence models can give rise to pro-cyclical outcomes and increased systemic risk.

In addition to the aforementioned risks, possible incompatibilities with the existing financial supervision and internal governance frameworks may arise, namely due to the particular difficulty in identifying law violations and the respective culprits, challenging regulatory approaches based on the principle of technological neutrality. Although these problems are not exclusive to artificial intelligence, there is capacity for their use to amplify these vulnerabilities due to the complexity, dynamism, and automatism of the techniques that artificial intelligence is able to employ. These vulnerabilities can also be exacerbated if there is a shortage of available talent, particularly in regulatory entities to face these challenges.

Another risk is that companies need but cannot use artificial intelligence in their activity, losing efficiency and competitiveness in a global market. In this way, the promotion of a clear legal framework is essential as is the promotion of companies’ digital literacy. It is essential to ensure a safe and inclusive digital transition that promotes more competitive and innovative societies.

In order to take advantage of the opportunities made available by artificial intelligence, the European Commission prepared a standard-setting instrument specifically aimed at the use of artificial intelligence which was presented on 21 April 2021. It is a European regulation proposal that envisages obligations for suppliers, users and other persons that interact with artificial intelligence systems, using for this purpose, a proportional approach based on risk, aiming to offer European citizens the necessary confidence to use solutions based on artificial intelligence and at the same time, encourage companies to develope them.

For all these reasons, strong cooperation between financial regulators as well as the latter with companies, is essential in a market wherein the banking, capital market and insurance sectors are even more interconnected and where frontier issues proliferate, increased by digital developments. In addition to the classic interconnections, decentralized finance, sustainable finance, or cybersecurity stand out. In this context, given the transversal nature of the challenges posed, I would once again emphasise the importance of the close cooperation between the ASF, the Banco de Portugal and the CMVM which is also voiced in this initiative.

And finally, I conclude by praising all the speakers for their interventions that promoted an important, captivating, and deep reflection on the challenges and applications of artificial intelligence and Big Data in the financial sector.

Thank you all.

This news item was originally published by the Portuguese Securities Market Commission (CMVM PT). For more information, please see the Source Link.

Regulator Information

Abbreviation: CMVM
Jurisdiction: Portugal

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