BMA to prioritise innovation as companies scale generative AI
Companies must develop cutting-edge solutions to “help them thrive in a continually shifting and interconnected economic landscape”, according to the chief executive of the Bermuda Monetary Authority.
The BMA released its 2024 Business Plan, which covers areas ranging from digital asset business to cyber-risk.
In the forward, BMA chief executive Craig Swan also said that many companies had begun scaling generative artificial intelligence to “reassess their operations, collect data and streamline workflows”.
GenAI is artificial intelligence capable of generating text, images, or other media, using generative models. Generative AI models learn the patterns and structure of their input training data and then generate new data that has similar characteristics.
Mr Swan added: “In this new era of digitisation, rapid changes are revolutionising business operations, technology and worldwide regulatory policies.
“Now, more than ever, companies must develop cutting-edge solutions to help them thrive in a continually shifting and interconnected economic landscape.
“The pace of innovation is challenging organisations to remain agile and adapt how they work to meet the ebb and flow of their markets.”
He said that from artificial intelligence and automation to decentralised finance and insurance-linked securities, “the financial services industry has evolved markedly over the last few decades with increasingly transformative leaps forward each successive year”.
“As firms confront issues such as inflationary pressures, relentless consumer demands, volatility in the commodity markets and extreme climate patterns, they are building systems to redefine and reimagine their future aspirations.
“Moreover, as a regulator in this dynamic business environment, the Bermuda Monetary Authority must also prioritise innovation.
“We have a duty to embrace disruptions and view them as opportunities to sharpen our effectiveness and efficiencies,” wrote Mr Swan.
“Additionally, to continue being a successful regulator, we must grow existing capabilities and foster new competencies that can help the BMA meet emerging challenges and risks head-on.”
He said that the BMA would “remain steadfast in our commitment to harness responsible innovation”.
“Technology continues to be the cornerstone of this strategy as we seek to build on the success of generative artificial intelligence and advance both operational and supervisory processes.
“In the same way that digitisation is changing how we conduct our daily lives, it is also stimulating commerce and innovative solutions.
“Many companies have begun scaling GenAI to reassess their operations, collect data and streamline workflows. The BMA recognises that GenAI has the potential to significantly augment productivity and drive business value.”
The BMA said that the 2024 Plan detailed “initiatives and projects to achieve positive outcomes and strengthen Bermuda's regulatory framework for the upcoming year”.
It added: “Additionally, the plan highlights a continued focus on holistically addressing operational resilience requirements across the financial services sector.”
Notable highlights in the 2024 BMA road map include the following:
• Enhancing the BMA's regulatory and supervisory regimes to meet the evolving needs of today's financial services companies
• Embracing employee engagement and diversity, equity and inclusion strategies as the foundation of operational success
• Building out the Insurance Code of Conduct to uphold the importance of financial transparency, consumer protection and education initiatives
• Continuing to embed an environmental, social and governance model and a sustainability strategy to promote environmental stewardship, social responsibility and economic resilience
Digital Asset Business:
Ensuring that Bermuda’s Digital Asset Business sector meets the benchmark for global standards is central to the BMA’s supervisory processes.
As the digital asset sector in Bermuda continues to mature prudently, the market is also becoming increasingly significant and sophisticated. A central element of the Authority’s strategy is to verify the DAB-related legislative and Digital Asset Business continued supervisory frameworks remain fit for purpose and encourage a secure and sustainable growth environment.
Regarding financial technology innovations, these are also supported by frameworks intended to guide their advancement. For example, the BMA’s supervisory practices include guidance developments for stablecoin issuers and stress test requirements for entities above a certain scale or complexity.
Meanwhile, as the industry evolves, the BMA will deepen its research efforts in emerging areas such as decentralised finance, stablecoins and DAB objectives lending and borrowing.
The BMA’s specific digital asset priorities this year include:
• Developing guidance for stablecoin issuers
• Providing stress testing requirements for entities above a certain scale or complexity
• Launching a ‘call for interest’ to pilot test embedded supervision in the DeFi context
Cyber-risk Supervision:
When it comes to cyber-risk management, vigilance is always required. The Authority’s 2024 Cyber Strategy includes employing cyber supervisory programmes and cyber assessments for new licensing authorisations, yearly return analysis and on-site inspections.
This year’s cyber-risk management strategies involve aligning supervisory cyber-risk approaches across sectors.
Achieving these goals will require the Authority to:
• Direct regulatory provisions and industry cyber best practices via engagement with regulated entities
• Reinforce specialist cybersecurity training sessions for BMA supervisors to foster in-house cyber expertise
• Pursue incident notifications and subsequent root cause report analysis
• Harness existing subject matter expertise on technological advancements, benefits and risks
The BMA said: “These initiatives fit alongside the ongoing objectives the Authority will carry into 2024, such as streamlining its workflows with digital tools and innovations, enhancing regulatory and supervisory regimes to ensure they remain agile and fit for purpose and helping firms bolster their network security protocols in response to cybersecurity risks and events.”
In the foreword, Mr Swan also wrote: “The authority's strategy is underpinned by deep expertise and cross-functional viewpoints designed to champion innovation.
“This plan's many thoughtfully curated objectives will optimise excellence while simultaneously preparing the organisation to meet and address emerging challenges that impact the regulatory environment.
“In a continually fluctuating business climate, this approach enables the BMA to open new pathways for enhancing our abilities and innovative practices today and for many years to come.”
• The 2024 Plan can be found on the BMA'swebsite. Or see Related Media
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