US
Commodities Futures Trading Commission (CFTC) on Artificial Intelligence (AI) & Regulatory Efforts and Standards
The CFTC’s Commissioner Kristin N. Johnson gave remarks on the regulatory response to Artificial Intelligence (AI) Usage before the Market Risk Advisory Committee Future of Finance Subcommittee Meeting, and announced the creation of an AI Safety Institute to promote U.S. innovation. The Commissioner said the CFTC should lead in creating an inter-agency task force focused on information sharing and composed of market and prudential regulators, specifically including major U.S. financial regulators. The task force would support the AI Safety Institute in developing guidelines, tools, benchmarks and best practices for use and regulation of AI in financial services.
Global
The Bank of International Settlements (BIS) Basel Committee Publishes Policy Recommendations for Non-Bank Retail Lenders
The Basel Committee issued a policy insights paper, “Safeguarding the Financial System’s Spare Tyre: Regulating Non-Bank Retail Lenders in the Digital Era” and provided an executive summary. The study assesses the regulatory requirements applied to Non-Bank Financial Intermediaries (NBFI) retail lenders in 20 jurisdictions, including those that accept deposits or an equivalent that play a critical role in the financial system. The paper proposes a methodology to strengthen/enhance prudential oversight of NBFIs in order to mitigate regulatory arbitrage risks, including reviewing existing group-wide supervision frameworks that involve NBFI retail lenders.
The Bank of International Settlements (BIS) Basel Committee Issues paper on The Macroprudential Role of Central Bank Balance Sheets
The Basel Committee issued a Working Paper entitled “The Macroprudential Role of Central Bank Balance Sheets”, focusing on the role of balance sheet content and economic effects. The paper reviews if there is a role for central bank balance sheet policies away from the effective lower bound on interest rates, whether all central banks could maintain lean balance sheets, and how these can relate to financial intermediary balance sheets. By calibrating a model to observed maturity structure of public debt and evidence on convenience yields of debt and reserves, the paper found that a large balance sheet could enhance the effectiveness of the conventional policy and in managing the business cycle.
