UK FCA releases report on using synthetic data for models in financial services

The UK Financial Conduct Authority (FCA) has released the second report on generating and using synthetic data in financial services, offering comprehensive insights into the governance, ethical, and regulatory considerations surrounding its use in the sector. The report builds on the first 2024 report and responds to industry feedback to the FCA's 2022 Call for Input, which focused on key governance considerations for organisations and professionals planning to use synthetic data. Drawing on insights from members of its Synthetic Data Expert Group (SDEG) (a specialised sub-group of the FCA's Innovation Advisory Group, launched in March 2023 and concluding with this second and final publication), the report offers practical guidance on identifying challenges in synthetic data projects, suggests possible mitigation strategies, and outlines ways to build strong governance practices. It outlines nine key principles for responsible synthetic data adoption which firms may wish to consider when developing their own approaches. These principles, which include accountability, transparency, fairness, and continuous monitoring, among others, provide a foundation for building trustworthy and effective synthetic data practices. The report does not constitute regulatory guidance but serves as a foundational resource highlighting insights and best practices identified from SDEG members, reinforcing the FCA's commitment to fostering safe experimentation and digital transformation within the UK financial sector.

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