Hong Kong Launches First AI Governance Framework to Guide Financial Institutions

Hong Kong has unveiled its first guidelines for the “responsible” application of artificial intelligence (AI) in the financial sector. Announced during the annual FinTech Week, these AI guidelines aim to help financial institutions harness AI’s transformative potential while safeguarding data privacy, cybersecurity, and intellectual property. By leading this initiative, the Hong Kong government is setting a regulatory framework to balance innovation with caution, ensuring the technology’s sustainable integration into banking, asset management, and other financial services.

The AI guidelines require banks, brokers, asset managers, and other financial institutions to establish an AI governance strategy, advising on how AI should be implemented and used. Institutions must also adopt a risk-based approach in managing AI systems and maintain human oversight to mitigate potential risks.

“As an international financial centre, Hong Kong’s market is both open and prudent in embracing AI,” said Financial Secretary Paul Chan. “Our policy clearly sets forth the government’s stance on AI’s responsible application in finance. We aim to leverage Hong Kong’s unique position as a connector between the Mainland and international markets, and with the free flow of information, we can accelerate development and productivity tailored to local needs.”

Key Points of Hong Kong’s AI Guidelines

The AI policy statement, delivered jointly by Hong Kong’s top financial and technology officials, highlights the government’s perspective on AI as a “data-driven, double-edged, and dynamic” tool. This view acknowledges both the opportunities and challenges AI presents, particularly in areas such as cybersecurity and privacy.

Some of the main points outlined in the policy are:

Dual-Track Development: Recognizing AI’s potential and associated risks, the government plans to follow a dual-track approach. This means promoting AI’s growth in finance while addressing challenges around cybersecurity, data protection, and intellectual property rights.
AI Governance Strategy: Financial institutions are encouraged to create strong governance strategies for AI, focusing on a risk-based approach in procurement, usage, and management. Human oversight remains a critical component in overseeing these AI systems.
Support from Local Universities: The Hong Kong University of Science and Technology (HKUST) will make its self-developed AI model and computing resources available to financial institutions, offering both advisory and training services. This collaboration underscores Hong Kong’s commitment to building a solid AI infrastructure that aligns academic resources with industry needs.
Regulatory Vigilance and Adaptation: As AI technology rapidly evolves, financial regulators will continue reviewing and updating regulations to ensure alignment with international practices, such as the shift toward explainable AI.
Strengthening Cyber Policing and Public Education: In partnership with international organizations, Hong Kong’s police will work to strengthen cyber policing efforts. Additionally, the Investor and Financial Education Council will launch initiatives to educate the public on AI’s impact on retail investing and financial management.

FinTech Week Emphasizes AI and Hong Kong’s Global Role

Hong Kong’s FinTech Week, hosted by InvestHK and Finoverse, has become a significant event for the region’s finance and tech industries. Now in its ninth year, the conference runs from October 28 to November 1, attracting 700 companies and highlighting Hong Kong’s position as a strategic link between global businesses and China, the world’s second-largest AI market.

At the event, Secretary for Financial Services and the Treasury Christopher Hui highlighted the government’s commitment to fostering a “healthy and sustainable” AI-driven market. “We encourage financial institutions to seize AI’s opportunities, as it can advance Hong Kong’s reputation as a high-quality, international financial hub,” he said. Hui also noted that numerous AI models and infrastructure are available for financial firms to leverage, emphasizing that these resources could support institutions in meeting both local and global challenges.

To emphasize Hong Kong’s commitment to AI, Hui showcased an AI avatar developed locally, a symbolic step for Hong Kong’s future in digital technology. “We want our financial sector to make full use of these AI resources,” Hui added, emphasizing the role of the industry in driving sustainable growth and competitiveness in the region.

AI Applications on the Rise: HSBC’s Perspective

AI’s rapid adoption in finance is already in motion, with applications in enhancing productivity, customer service, programming, and even coding. In a fireside chat during FinTech Week, Luanne Lim, CEO of HSBC Hong Kong, highlighted the extensive usage of generative AI (GenAI) within the bank. According to Lim, HSBC is exploring over 100 GenAI use cases to streamline its services and boost client-facing functions.

“Generative AI brings significant benefits, but not without its own risks and limitations,” said Lim, who also chairs the Hong Kong Association of Banks. “This is where regulation plays an important role, and we welcome the government’s policy.” For HSBC, AI offers a competitive edge, but it also requires collaboration across the industry to build a robust and trusted digital ecosystem.

Lim believes that Hong Kong’s ambition to become a global digital innovation hub will succeed only through collaboration. “The future of AI in finance depends on a collaborative, rather than competitive, approach. A strong ecosystem will help drive digital transformation while ensuring responsible AI practices,” she added.

Balancing Innovation with Security

AI’s adoption in financial services holds considerable promise for Hong Kong, but it also raises cybersecurity and ethical concerns. By emphasizing the importance of a dual-track approach and prioritizing public education, the Hong Kong government aims to balance innovation with precaution.

The Investor and Financial Education Council, a government initiative, will work on public outreach programs to raise awareness about AI’s impact on retail investment and personal finance. These efforts aim to help citizens navigate AI-driven products responsibly while understanding the associated risks.

With this new framework, Hong Kong aspires to lead by example in integrating AI responsibly into financial services.

The AI policy reflects the government’s understanding that while AI can drive growth and efficiency, it must be managed with oversight and vigilance.

As Hong Kong moves forward with its AI strategy, it sets a precedent for other financial centers seeking to embrace technological advancements without compromising security and ethical standards.