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Financial Services regulator proposes artificial Intelligence testing environment as a part of its AI Lab.
FCA (Financial Conduct Authority) plans to offer companies under its supervision a service that allows them to test out Artificial intelligence (AI) tools before they go live.
The FCA said that firms are currently being held back in their AI development and deployment due to the absence of a testing environment. It is “seeking opinions from firms on how its live AI-testing service can help them deploy safe and responsible AI which will benefit UK markets and consumers”. The proposed service is expected to run for 12-18 months with a launch date of September 2025. It will provide regulatory support to firms ready to deploy AI models that are aimed at consumers or markets.
Live testing is not currently part of the Fca ai labBut through the proposed service financial services firms will be able to work with the regulator in order to check if their AI development is ready. The FCA will gain valuable intelligence from the testing and have a better understanding on how AI can impact the financial markets.
Jessica Rusu is the FCA’s chief information, intelligence, and data officer. She said: “Under this new strategy, we are committed to being more tech-positive to support growth.” We want financial firms to benefit from AI and so do their customers, so we are providing a safe environment for them to test it.
Embracing technology
The FCA says that the proposal is based on its “five year strategy” which outlines how it will support growth through innovation and ensure the continued competitiveness for the UK’s leading financial services by adopting a tech-positive attitude. It will also help the FCA become a smarter regulator, embracing technology and data to be more efficient and effective.
AI has been adopted by banks in areas like customer service and software design. The technology has huge potential, but also introduces some risks. Risks to financial markets
Bank of England statistics revealed recently that 75% of financial firms are already using AI with another 10% planning to use in the next three year.
Sarah Breeden, deputy Governor of Financial Stability at the Bank of England spoke last year at an international financial conference held in Hong Kong. Regulation must be in place before AI adoption
She said that AI is expected to have a significant impact on productivity and growth for the financial sector as well as the rest of the country. “But in order for the financial sector, as regulators, to reap these benefits, we must have policy frameworks designed to manage any financial stability risks that may come with them. Economic stability is the foundation for growth and prosperity. It would be counterproductive to let AI undermine it.
Breeden continued: “We do not want to be in a position where we have to choose between, on one hand, letting an important new technology threaten financial security, and, on the other hand, preventing its adoption and losing out on innovation and growth – just because we lack the policy frameworks that will enable its safe use.”
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