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. artificial intelligence and machine learning enable the industry to make much better use of available data than possible previously, by efficiently developing a deep understanding of the unique needs of their customers and risk profiles. central banks and supervisors must transform alongside the financial sector, in order to maintain effectiveness in fulfilling our mission. 4. our central banking and supervisory mission remains unchanged. but given the rapid transformation and the changing landscape, the way we achieve our mission and objectives needs to evolve quickly. overall, our approach must be to ensure that our toolkits and methods remain relevant and fit for purpose. to do so, we need to be informed by a deep understanding not only of the new players and their products and services, but also of the new technologies – how they work, why they are being adopted, how they better serve customers ’ needs, how they are re - shaping financial services and the broader financial sector, and the opportunities and challenges they present. 5. the technologies that are transforming the financial sector can also be used to 1 / 5 bis central bankers'speeches transform central banking and supervision

. take artificial intelligence, for example. this has been used by banks for credit scoring, and by insurers for underwriting and fraud detection. supervisors, including mas, have taken steps to ensure that artificial intelligence ( ai ) is used by financial institutions in a fair and responsible manner. predictive analytics can also empower supervisors to be more effective. 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. beyond experimentation, such exploration may also require testing of use cases in the market to assess their technical functionality and commercial viability in a production environment. to this end, regulatory sandboxes have come in useful over the past few years. tailored relaxation of regulatory requirements within well - defined parameters has allowed opportunities afforded by new technologies to be explored, while maintaining the overall soundness of the financial system. but central banks ’ role in innovation goes further than this.. moving on to my second point ; beyond embracing and facilitating innovation ; central banks can play an important role in leading innovation, by being at the centre of experimentation.