adnan zaylani mohamad zahid : banking in the era of generative ai closing remarks by mr adnan zaylani mohamad zahid, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the3rd malaysian banking conference 2024, organised by the asian institute of chartered bankers ( aicb ) and the association of banks in malaysia ( abm ), kuala lumpur, 11 july 2024. * * * a very good afternoon and thank you for inviting me to deliver the closing remarks for the 3rd malaysian banking conference 2024. congratulations to the asian institute of chartered bankers ( aicb ) and the association of banks in malaysia ( abm ) for organising a productive and insightful conference. " banking in the era of generative ai ", is an apt theme at a time when artificial intelligence technology is rapidly evolving, with widespread implications for financial services. it is an exciting time for technological innovation in the financial sector. the digitalisation of financial services already promises many new possibilities, more frictionless experiences and better - customised services for customers. with the advent of large language models – or llms – we have in our hands the capabilities of powerful ai tools that will further expand these possibilities. the malaysian financial sector is well - positioned to capitalise on all these developments. we benefit from strong financial and telecommunications infrastructure. today, over 97 % of malaysians have access to the internet, 95 % own a smartphone, and 96 % of adults have an active deposit account. as the central bank and financial regulator, bank negara malaysia ( bnm ) has a strong interest in the digitalisation of financial services. four years ago, we launched the licensing framework for digital banks, and as of today, three of the awarded licensees have commenced operations. just this week, we also launched the licensing and regulatory framework for digital insurers and takaful operators ( ditos ). indeed, many of our incumbent players have also embarked on their digitalisation journey. our vision is for the financial sector to leverage technology, including ai, to foster market dynamism and better serve the needs of malaysians. the rapidly evolving nature of ai brings forth unprecedented potential benefits and risks, many of which we have yet to fully comprehend. for example, the rise of llms has propelled generative ai, or genai, into mainstream conversations, revolutionising human - computer interaction by shifting from traditional coding and interfaces to natural text and speech.

to be limited so as to make the rules of the game clear for global investors. the council approach gives the resolution authority powers to discretionarily exclude any type of liability for reasons of impossibility within a certain time frame, or to avoid wide - spread contagion. in our view, there would have been a benefit in defining ex ante the categories of liabilities that could have been excluded. this means that investors will lack certainty about how the new framework will be used, and in my view it may slow down the process of reducing financial fragmentation. for instance, there will inevitably be a political economy dimension to how national resolution authorities decide to exercise their discretion, with creditor classes that have particular importance in different national contexts likely to be favoured. this will affect the level - playing field between member states. moreover, the brrd foresees that after 8 % of a bank ’ s liabilities have been bailed - in, the national resolution authority has the option to use its resolution fund to bail - out a further 5 % of the bank ’ s liabilities. however, some countries will have larger resolution funds than others, for instance if they have more banks paying into the fund. this means that these bis central bankers ’ speeches countries would be able to bail - out more domestic banks before they exhaust the fund than those with less resolution resources available, who would need to use more bail - in. this will also not help reduce fragmentation. the single resolution mechanism ( srm ) – comprising of a european resolution authority and a single resolution fund – could remedy both these fragmentation problems of the brrd, which is a further reason why it is so essential. first, a central authority would not be influenced by national preferences when applying discretion. second, a single resolution fund, financed by levies on the whole banking sector and with a european backstop, would be effectively de - linked from national budgets. however, these benefits will of course only apply to countries that join the ssm and srm. moreover, it is essential that the european resolution authority will be in a position to act swiftly – if needed over a weekend for example – in order to avoid uncertainty about its course of action with a specific bank. as you know, we await the release of the com - mission ’ s proposal on the srm which is expected tomorrow, and i expect it goes in this direction. as to its institutional structure, the first - best option would be to entrust a newly established