good culture. but we can have a lot of influence here. in the last few months we have taken a very important step here by introducing for banks the senior managers and certification regime, as proposed by the parliamentary commission on banking standards. it replaces the approved persons regime, and in time it will be implemented across the regulated financial services sector. there is, let me be clear, no magic bullet to change culture, but the new regime is a big step forward in my view. this is because at its heart it embeds the notion of personal responsibility for the affairs of the firm at the level of senior management. the approved persons regime did not do this, and in practice it focused on a notion of culpability not responsibility. these two notions are different. i have said many times, but will keep doing so, that senior managers cannot delegate responsibility. to be fair, many have said to me over the last few years that this change does not make a difference for them as they always thought they were responsible. good. but, set this against other conversations i have had which have doubted the enforceability of this notion of responsibility. this has concerned, but not distracted me. so, to be clear, responsibility is the central plank of the new senior managers regime. we do want senior managers to feel this responsibility in all that they do and that includes a responsibility for forming and implementing a positive culture throughout the organisation. in this respect culture is no different to strategy ; where are we today, where do we aspire to be tomorrow, how will we get there and what risks must we mitigate along the way. responsibility, as embedded in the senior managers regime, is therefore an important hook to assist in firms ’ shaping their own culture, and also to provide regulators with the powers to conduct supervisory oversight and to act when needed. but, let me reiterate that it is not the job of regulators to enforce culture and to change culture. if we have to step in, and occasionally we do, the overriding conclusion is that management has failed. the common theme there is that the incentives facing a firm will determine its culture and will determine its success in terms of outcomes. one of the most important elements of the regulatory changes since the crisis is that we have adopted an approach of seeking to align those incentives with our public interest objectives as well as the private interest of the firm. you can also see this in our approach to the too big or too difficult to fail problem where the

cyborg supervision – the application of advanced analytics in prudential supervision speech given by james proudman executive director, uk deposit takers supervision workshop on research on bank supervision bank of england 19 november 2018 i am grateful to sian besley, david bholat, charlotte bull, stephen denby, ryan lovelock, clair mills, philip sellar, pete thomas and sam woods for their assistance in preparing these remarks and conducting background research and analysis. all speeches are available online at www. bankofengland. co. uk / speeches i. introduction recognising faces comes instinctively to humans. until fairly recently, however, it proved beyond the ability of computers. advances in artificial intelligence ( ai ) - the use of a machine to simulate human behaviour – and its subset, machine learning ( ml ) – in which a machine teaches itself to perform tasks – are now making facial recognition software much more widely available. you might even use it to access your bank account. because it is so easy for us but so hard for computers, facial recognition is a good illustration of the challenges faced in developing ai. enabling a machine to teach itself to recognise a face requires sophisticated algorithms that can learn from data. advances in computational power and algorithmic techniques are helping machines become more human and super - human like. ml also requires lots of data from which to learn : data are the fuel that powers it – the more data used to train the algorithms, the more accurate their predictions typically become. hence advances in ai are often associated with big data and the recent huge advances in the volume and variety of data available ( see figure 1 ). as the sophistication of algorithms and volume of data rise, the uses of ai in every - day life are expanding. finance is no exception. in this speech i want to explore the impact of ai and advanced analytics more broadly, on the safety and soundness of the firms we supervise at the pra, and how we are starting to apply such technology to the supervision of firms. in particular, i want to explore the seeming tension between the pra ’ s supervisory regime that is firmly centred on human judgment, and our increasing interest and investment in automation, machine learning and artificial intelligence. ii. changing the nature of the risks we supervise like many other firms, banks are looking to harness the power and speed of ai. if you were to take some parts of the media at face value you might be tempted to conclude that a revolution is underway. there