Issue link: https://maltatoday.uberflip.com/i/1179052
24.10.19 5 NEWS MFSA organises its third strategy meeting for financial services practitioners Human responsibility in financial services must remain despite artificial intelligence drive - German regulator THE future of financial services may be in artificial intelligence but ulti- mate responsibility for decisions must remain with management, according to Germany's supervisory authority chief. Felix Hufeld, president of BaFin, said supervisory authorities had to em- brace digitalisation in the sector but underscored the responsibilities of company managers. "The ultimate responsibility must remain with the management, with people not algorithms. This is why we cannot accept algorithms that are pre- sented to us as black boxes," Hufeld told a gathering of financial services practitioners organised by the Malta Financial Services Authority. Hufeld was a keynote speaker at the MFSA's third strategy briefing held on Monday at the Corinthia Palace in At- tard. "AI processes are good but the ulti- mate responsibility must remain with the board and not be delegated to al- gorithms," he said. The German supervisory chief harped on the importance of author- ities keeping up with the fast pace of change in the financial services sector, likening the situation to the series, Game of Thrones. "In Game of Thrones certainties are cast aside and in similar fashion, changes in the financial services sec- tor are happening very fast, posing challenges on supervisors to keep up," Hufeld said. He said that digitalisation may change the manner in which the sec- tor works but the supervisory craft re- mains the same. "We analyse data and draw con- clusions from it. The craft does not change in principle but it does not mean it stays as it is," Hufeld said. In a subsequent one-to-one chat with MFSA CEO Joseph Cuschie- ri that was open to questions from the floor, Hufeld was asked for his thoughts on the creation of a capital markets union on the same lines as the EU's banking union. "The nature of the beast in capital markets is different from the bank- ing union. It would be good to have harmonisation but that is a political problem," Hufeld said. With reference to the UK's exit from the EU and the potential impact this could have on the European financial services sector given London's large share of the market, Hufeld kept a positive tone. "I hope we find the means to in- tegrate the UK and combine forces when rational thought returns. I re- main optimistic because if we do not, the laughing party will be New York or Shanghai," he said. Hufeld praised the MFSA's strategy unveiled earlier this year to beef up its supervisory role, including the fight against financial crime. He would not be drawn into com- menting on Malta's taxation system, which has come under fire from larger EU countries like Germany because of the tax advantages it offers. "I am a regulator and as a supervisor it is no my job to comment on oth- er country's fiscal decisions," he told journalists. In his welcoming address, MFSA chairperson John Mamo said the au- thority was "strongly committed" not to have a repeat of the "unfortunate events" of the past few years. He words were an obvious reference to the Pilatus, Satabank, and Nemea banks scandals that saw the closure of these institutions amid severe crit- icism of the regulatory authorities for failing to weed out the banks before being licenced. Mamo said the authority's structure was strengthened and significant in- vestment has been made in human and IT resources to help the MFSA in its fight against financial crime. MFSA CEO Joseph Cuschieri said the authority would, in the coming days, publish a major reform of the standards for corporate service pro- viders. "We want to raise our standards but we also believe that we to strengthen the first point of contact for investors in our jurisdiction by ensuring corpo- rate services providers up their game as well," Cuschieri said. Another investment in the weeks to come will be an automated super- visory system, which will enable the MFSA to become more efficient in analysing data and acting on it. Felix Hufeld, president of BaFin "The nature of the beast in capital markets is different from the banking union. It would be good to have harmonisation but that is a political problem."