The MAS has published a consultation paper proposing comprehensive new Guidelines on AI Risk Management, aimed at ensuring the responsible and secure use of AI across the financial sector.
The Guidelines, which will apply to all financial institutions (FIs), outline MAS’ supervisory expectations for governance, oversight, and lifecycle risk management of AI systems. They also seek to enhance FIs’ ability to identify, assess, and mitigate risks associated with emerging AI technologies, including generative AI and AI agents.
MAS has structured the Guidelines around three main pillars. The first focuses on oversight of AI risk management, where boards and senior management will play a central role in defining frameworks, policies, and internal controls. They will be responsible for fostering a risk-aware culture and ensuring the governance structure aligns with the organisation’s scale and AI use cases.
The second pillar outlines the need for robust AI risk management systems, policies and procedures. This includes identifying and tracking all AI systems across an organisation, maintaining updated AI inventories, and performing materiality assessments that consider the complexity, impact, and degree of reliance on AI tools.
The third pillar details AI lifecycle controls, capabilities, and capacities, calling for safeguards in data governance, fairness, transparency, explainability, and third-party risk. Financial institutions are expected to introduce proportionate measures based on the risk materiality of each AI application. Additionally, they should ensure they possess adequate expertise and operational capacity to manage AI effectively and responsibly.
MAS noted that these new guidelines are built upon its 2024 supervisory review of key banks’ AI use, alongside feedback from extensive industry consultations. The regulator’s latest move marks a significant step in aligning Singapore’s financial system with global standards for trustworthy and transparent AI deployment.
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 is expected to help shape the final guidelines, ensuring a balanced approach that promotes innovation while safeguarding against misuse or unintended consequences of AI adoption in the financial sector.
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