Jacqueline Loh: opportunities  Innovation in central banking – seizing  Remarks by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of Singapore, at the BIS Innovation Summit, 25 March 2021. * * *  Introduction 1. Good morning, good afternoon and good evening – depending on where you may be attending this global event from. I congratulate the BIS on the success of this inaugural BIS Innovation Summit; which demonstrates the central banking community’s strong commitment to innovation, so that we may better serve our stakeholders. 2. I would like to share some perspectives on central bank innovation to round off this event. Firstly, why central banks should embrace innovation; Secondly, how central banks can facilitate and lead innovation while managing the inherent risks; and Lastly, how central banks can channel innovation capabilities to address two key challenges – improving sustainability and enhancing cross-border payments. Embracing Innovation 3. Let me first start with why central banks should embrace innovation. Innovation is transforming the financial sector. Digitalisation of financial services has made it easier for financial institutions to expand their global footprint, opened the door to new players, and set the stage for increasing cross-border connectivity. The adoption of new technologies has become more prevalent, and is fundamentally changing how the financial system functions. Distributed ledger technologies for example, have seen use cases expand beyond digital payments and trade finance, to the security of data and personal identity, as well as anti-money laundering.

AI and machine learning, when applied to the myriad of data that supervisors have, offer the possibility of real-time customised risk assessments and early warning capabilities. This can inform policy interventions in times of heightened risk, and help to preserve financial stability. To this end, the BIS Innovation Hub Singapore Centre, is spearheading a RegTech and SupTech project to pilot the development of an integrated regulatory reporting platform and data analytics utility. This allows supervisors to assess microprudential and macroprudential risks by applying AI and machine learning tools to unstructured data as well as to big datasets. The application of such tools is enabled by transforming regulatory reporting to be based on the mapping of granular data to a common data model, moving away from fixed templates. This integrated solution, which has the potential to be scaled across supervisory authorities, will be a tangible example of a global public good that the BIS Innovation Hub can deliver for the benefit of the central banking and supervisory communities. Leading Innovation 6. Having touched on the ‘why’ of innovation, let me share some views on ‘how’ central banks can support and facilitate innovation by the industry. The central banking community has already been generally facilitative towards innovation while managing the inherent risks. In fact, some central banks including MAS have deliberately provided room for emerging technologies to be explored deeply, and their benefits and risks to be properly understood. We have avoided having regulation front-run innovation, so as not to stifle new ideas.