The MAS has released a consultation paper proposing new guidelines to help financial institutions responsibly manage the risks associated with AI.
The proposed Guidelines on AI Risk Management outline supervisory expectations for how financial institutions should oversee, control, and build capacity for the use of AI in financial services.
According to MAS, the guidelines will apply across the entire financial sector, establishing a common framework that is flexible and proportionate to the scale and complexity of AI usage within each institution. The framework also covers a broad range of AI technologies and applications, including generative AI and emerging AI agents, reflecting MAS’ recognition of the technology’s evolving nature.
MAS highlighted three key areas of focus. The first involves governance and oversight, where boards and senior management are expected to play a central role in ensuring sound frameworks, policies, and processes for AI risk management are in place. This includes fostering a strong internal culture around responsible AI use.
The second area covers AI risk management systems, policies, and procedures. Institutions are required to identify all areas of AI use across their organisations, maintain up-to-date AI inventories, and assess the materiality of risks based on factors such as impact, complexity, and reliance. These steps aim to ensure full visibility of AI deployment within firms.
Finally, MAS outlined the importance of AI life cycle controls and ensuring institutions have sufficient capabilities and capacity to manage AI responsibly. This includes implementing robust controls over data management, fairness, transparency, explainability, human oversight, third-party risks, and change management. The guidelines emphasise that these controls should be applied proportionately, according to each AI system’s assessed level of risk.
The new proposals build on MAS’ thematic review of key banks’ use of AI in 2024 and incorporate insights from discussions with financial institutions across Singapore’s financial ecosystem.
MAS deputy managing director Ho Hern Shin said, “The proposed Guidelines on AI Risk Management provide financial institutions with clear supervisory expectations to support them in leveraging AI in their operations. These proportionate, risk-based guidelines enable responsible innovation by financial institutions that implement the relevant safeguards to address key AI-related risks.”
The consultation paper marks another step in Singapore’s ongoing efforts to position itself as a global leader in AI governance and responsible financial innovation.
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