The FCA and Bank of England published a joint Discussion Paper on Artificial Intelligence (AI) in October 2022. The DP can be found here. The date for response to the DP is 10 February 2023.
The use of artificial intelligence (AI) and machine learning (ML) in financial services may enable firms to offer better products and services to consumers, improve operational efficiency, increase revenue, and drive innovation. All of which may lead to better outcomes for consumers, firms, financial markets, and the wider economy.
As their recent survey indicates, AI adoption within financial services is likely to continue to increase due to increased availability of data, improvements in computational power, and wider availability of AI skills and resources. Similarly, the Bank of England (the Bank), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) (collectively ‘the supervisory authorities’) also endeavour to leverage AI and benefit from this technology to help meet our respective statutory objectives and other functions.
Although the use of AI may bring a range of benefits, it can also pose novel challenges for firms and regulators as well as amplify existing risks to consumers, the safety and soundness of firms, market integrity, and financial stability. One of the most significant questions is whether AI can be managed through clarifications of the existing regulatory framework, or whether a new approach is needed. How to regulate AI to ensure it delivers in the best interests of consumers, firms, and markets is the subject of a wide-ranging debate, both here in the UK and in other jurisdictions around the world.
This Discussion Paper (DP) sits within the context of this wider debate and focuses on the regulation of AI in UK financial services. The Bank, PRA, and the FCA seek to encourage a broad-based and structured discussion with stakeholders on the challenges associated with the use and regulation of AI. They are keen to explore how best to address these issues in a way that is aligned with our statutory objectives, provides clarity, is actionable, and makes a practical difference for consumers, firms, and markets.
Beginning with their current regulatory framework, they have considered how key existing sectoral legal requirements and guidance in UK financial services apply to AI. This evaluation will allow them to consider which ones are most relevant, explore whether they are sufficient, and identify gaps. The DP considers how such legal requirements and guidance apply to the use of AI in UK financial services to support consumer protection, competition, the safety and soundness of individual firms, market integrity, and financial stability. How can policy mitigate AI risks while facilitating beneficial innovation? Is there a role for technical and, indeed, for global standards? If so, what?
Send your response in here.
