Red flags raised over British banks’ approach to AI
The Bank of England, the Financial Conduct Authority (FCA) and the Treasury are exposing the public and the financial system to potentially serious harm due to their current positions on the use of artificial intelligence in financial services, according to a new report by the Treasury Select Committee.
The report, which was published on Tuesday (20 January), shows more than 75% of UK financial services firms are now using AI, with the largest take-up among insurers and international banks.
It shows that AI is being used by businesses in a variety of ways, including to automate administrative functions and to deliver core services such as processing insurance claims and credit assessments.
While MPs acknowledged that AI and wider technological developments could bring considerable benefits to consumers, the Treasury Committee believes that action is needed to ensure that this is done safely.
One recommendation is for the Bank of England and the FCA to conduct AI-specific stress-testing to boost businesses’ readiness for any future AI-driven market shock.
The Treasury Committee is also recommending that the FCA should publish practical guidance on AI for firms by the end of this year. This should include how consumer protection rules apply to their use of AI as well as setting out a clearer explanation of who in those organisations should be accountable for harm caused through AI.
“Firms are understandably eager to try and gain an edge by embracing new technology, and that’s particularly true in our financial services sector which must compete on the global stage,” said Chair of the Treasury Select Committee, Dame Meg Hillier.
“The use of AI in the City has quickly become widespread and it is the responsibility of the Bank of England, the FCA and the Government to ensure the safety mechanisms within the system keeps pace.
“Based on the evidence I’ve seen, I do not feel confident that our financial system is prepared if there was a major AI-related incident and that is worrying. I want to see our public financial institutions take a more proactive approach to protecting us against that risk.”
