In a discussion paper, UK financial supervisory authorities assessed the benefits, risks and harms of the current legal framework applicable to artificial intelligence in financial services.
UK financial services regulators, the Bank of England (BoE), the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) – together the supervisory authorities – have published a joint discussion paper (DP5/22) on artificial intelligence (AI) and machine learning. On 11 October 2022. The discussion paper was intended to facilitate public debate on the safe and responsible adoption of AI in financial services in the UK.
Essentially, the discussion paper examines:
potential advantages of providing a regulatory definition of artificial intelligence;
the benefits, risks, and harms related to the use of artificial intelligence and machine learning that could significantly affect or even change how financial services and markets operate;
How the current regulatory framework can be applied to artificial intelligence.
Possible risks and damages
The supervisory authorities also raised discussion questions for stakeholder input, with the aim of understanding whether the current regulatory framework is sufficient to address the potential risks and harms associated with AI and how any further intervention could support safe and responsible adoption of AI in the UK. Financial Services.
The discussion paper provides a platform for supervisory authorities, experts and stakeholders to collaborate and assess whether the current legal framework can adequately regulate AI technology by protecting the objectives of both supervisory authorities while promoting innovation in UK financial services.
This consultation occurs in parallel with the UK Government’s ongoing work to develop its cross-sectoral approach to regulating AI technology, and will therefore provide a valuable contribution to this broader policy debate.
Define artificial intelligence
Supervisory authorities suggest that there are benefits to a precise definition of AI which include: creating a common language for companies and regulators, which may mitigate uncertainty; Assist in a unified and coordinated response of regulators to AI; and provide a basis for determining whether or not specific use cases can be registered under certain rules and principles.
The benefits and risks of using AI are categorized in the discussion paper based on the objectives of each of the supervisory authorities, namely consumer protection, competition, corporate safety and integrity, protection of policyholders, financial stability and market integrity.
The supervisory authorities have also provided current and future legal requirements and guidance relevant to mitigating the risks associated with AI, including but not limited to the FCA Consumer Duty Rules, the UK General Data Protection Regulation (UK GDPR), the Equality Act 2010 and the Senior Managers System. Accreditation (SM&CR).