PIMFA
What is Artificial Intelligence?
A recent Financial Conduct Authority (FCA) discussion paper, DP22/4: Artificial Intelligence, offered the following definition of Artificial Intelligence (AI):
‘It is generally accepted that AI is the simulation of human intelligence by machines, including the use of computer systems, which have the ability to perform tasks that demonstrate learning, decision-making, problem solving, and other tasks which previously required human intelligence. Machine learning is a sub-branch of AI.
AI, a branch of computer science, is complex and evolving in terms of its precise definition. It is broadly seen as part of a spectrum of computational and mathematical methodologies that include innovative data analytics and data modelling techniques.’
- WHAT DO FIRMS NEED TO CONSIDER?
Many PIMFA members are already using AI systems and tools in their everyday operations, and it is likely that the adoption of AI in financial services will increase rapidly over the next few years.
PIMFA firms already use AI tools for several purposes. For example, they analyse large volumes of data quickly, easily, and accurately, which enables their employees to spend more time working with and for their clients.
There are concerns that as AI becomes more advanced, it could introduce new risks, for example:
system develops biases in its decision making
leading firms to make bad decisions
rESULTING IN Poor outcomes for their clients
This is why it is essential that firms deploying AI systems have a suitably robust control framework around their AI components to keep a careful check on what they are doing.
As with any innovation, AI has the potential to make fundamental and far ranging improvements in how firms can serve their clients. However, we must ensure it is continually monitored and checked regularly to manage the risk and maximise the benefit.
- What are regulators doing?
A number of government departments are asking regulators such as the Financial Conduct Authority (FCA), Bank of England (BoE), Information Commissioners Office (ICO) and Competition and Markets Authority (CMA) to publish an update on their strategic approach to AI and the steps they are taking according to the White Paper. The Secretary of State is asking for this update by 30 April 2024.
On 13 March 2024, the EU Parliament approved the EU Artificial Intelligence Act. The EU AI Act sets out a comprehensive legal framework governing AI, establishing EU-wide rules on data quality, transparency, human oversight and accountability. It features some challenging requirements, has a broad extraterritorial effect and potentially huge fines for non-compliance.
11 September 2024
FCA New Digital Regulation Cooperation Forum AI and Digital Hub
- The FCA has updated its website on the Digital Regulation Cooperation Forum providing information about the new DRCF artificial intelligence and digital hub.
- The hub provides an advice service set up to support innovators with their cross-regulatory queries and has been established by the members of the DRCF – the FCA, the Information Commissioner’s Office, the Competition and Markets Authority and Ofcom.
- The hub will run for a one-year pilot period, ending in March 2025.
Further details can be found here and you can access the hub here.
Bank of England (BoE): Artificial Intelligence (AI) Consortium
The BoE is establishing an AI Consortium to provide a platform for public-private engagement to gain input on the capabilities, development, deployment and use of AI in UK financial services.
The aim of this engagement is to:
- Identify how AI is or could be used in financial services;
- Discuss the benefits, risks and challenges arising from the use of AI; and
- Inform the BoE’s approaches to addressing risks and challenges, and to promoting the safe adoption of AI.
Alongside publication of the terms of reference, the BoE has also published a call for interest for membership – applications should be submitted by 8 November 2024.
Access further details about the consortium here.
Find out more about the Women Symposium here
