Azerbaijan's Central Bank plans AI governance guidance by year-end

The Central Bank of Azerbaijan plans to present AI governance guidelines to the financial sector by the end of this year and a data governance document in November, said Elmir Hasanli, director of the bank's Data Department.

Report informs that he was speaking at the 12th Investment and Sustainable Development in Microfinance Conference, organized by the Azerbaijan Microfinance Association (AMFA) in Baku.

Hasanli said the Central Bank involves financial sector participants in preparing its guidelines and shares the documents with relevant institutions.

"The AI governance methodology was developed jointly with banks," he said.

He noted that using artificial intelligence in lending creates several risks, including model drift. Although a model may initially make sound decisions, its performance can change over time and produce incorrect results without regular monitoring.

Another risk is bias. A model trained on past decisions may absorb their biases and subsequently make decisions that lack transparency.

Hasanli said explainability is a key consideration when using AI in lending.

"When a customer is denied a loan, the reasons must be explained clearly and comprehensively. Both the customer and the party responsible for the decision must understand why the loan was not approved.

"You can acquire the most expensive model, but the main criterion is not its price. It is the quality of its decisions and how well they can be justified. A model's quality should primarily be assessed by how comprehensive, transparent and explainable its decisions are," he said.

Hasanli said the data governance guidelines would cover banks, nonbank credit institutions and analytical organizations.

The document will address data quality, governance, accessibility, completeness and other important issues.

"This is not the first objective. We want the entire sector to move in the same direction and work toward the same goal. The main aim is for the whole sector to take these guidelines into account," he added.