Executive summary 1

Introduction 3

1. An overview of the use of AI in the financial system 5

  1.1. AI adoption in the financial sector 5

  1.2. Use cases and benefits of AI in the financial system 6

  1.3. Risks and implementation challenges of AI adoption for financial institutions 13

2. Organisation-wide AI governance 20

  2.1. Strategic direction and oversight 20

  2.2. Governance and accountability 22

  2.3. AI risk management framework and effective documentation 24

  2.4. Organisational adaptability 27

3. AI lifecycle management 30

  3.1. Stages of AI development and deployment 30

  3.2. Materiality and risk assessment 31

  3.3. Selection process 33

  3.4. Data governance 35

  3.5. Explainability and transparency 38

  3.6. Performance management 43

  3.7. Human oversight 49

  3.8. Cyber and ICT risk management 55

  3.9. Third-party AI risk management 60

Annex: List of Sound Practices for financial institutions’ responsible AI adoption 65

Glossary 66

References 68