UK regulator expects “cyborg supervision” in coming years

Excerpts from speech by James Proudman, executive director, UK Deposit Takers Supervision, at Bank of England, 19 November 2018

Advanced analytics, machine learning and AI seem to be everywhere now – from image and voice recognition software to driverless cars and health care. Banks too are also seeking to apply these tools and techniques to the range of their activities, many of which used to be seen as the preserve of experts: from risk assessment, to financial crime prevention and trading in the financial markets. These trends are likely to accelerate.

Banking supervisors need to adapt to technology too. Supervisors need to stay abreast of how technology is changing the risks the banks are running and how they are being controlled. And just as advanced analytics are opening an ever wider range of banks’ activities to automation, so too are they creating new possibilities for us to supervise banks more efficiently and effectively.

But until machines can fully replicate human cognition — a remote possibility for the foreseeable future — supervisory judgment will still have a central role to play. My central expectation is that over coming years the Prudential Regulatory Authority will develop a form of ‘cyborg supervision’ involving humans and machines working ever more closely together and leveraging their comparative strengths.

Read the full speech

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