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.

Where appropriate, central banks can also encourage industry stakeholders to pursue specific commercialisation opportunities which meet wider financial system needs. In so doing, central banks need to carry the spirit of innovation in their working philosophy, be open to collaborate with the private sector, adopt an agile approach when exploring possibilities, and even be prepared to fail fast within boundaries. 8. At this juncture, allow me to share with you MAS’ journey on Project Ubin, and how this collaboration between the public and private sectors has led to payments innovation that will benefit the ecosystem. When cryptocurrencies and public blockchains first emerged, we struggled to understand what they were and how they worked. The idea that a group of miners linking up blocks into a chain could turn computational power into assets of value was highly bewildering. We too had our doubts and felt that the best way to understand the technology, was to test it out for ourselves and learn through practical experimentation. MAS recognised that distributed ledger technologies held the potential to empower an industry infrastructure for more efficient clearing and settlement of payments and securities. Such an infrastructure would benefit the entire financial sector, but no individual firm had an incentive to drive exploration of this possibility. We thus launched Project Ubin in 2016, which has been through five phases through 2020. Under this project, MAS collaborated closely with industry partners to explore the development of blockchain-based settlement systems and understand the benefits and value it brings.