UK financial sector at risk due to lack of AI governance
Policymakers are facing growing pressure to act on systemic risks posed by artificial intelligence, as a new report published by MPs on the Treasury Committee show the ‘wait and see approach’ is leaving firms vulnerable to serious risk.
The warnings come as AI adoption accelerates across banking and financial services, with more than 75% of City firms now using AI.
However, despite reliance on AI to automate administrative tasks and perform core operations, the UK has failed to implement specific regulations to govern the use and management of AI and equally those in charge of enforcing them.
With businesses being solely responsible for determining how existing tech regulations apply to their usage of AI and the overall lack of transparency around how AI can influence financial decisions, there is huge potential for both businesses and consumers to be at risk of financial instability and cybersecurity risks.
Greg Watson, CEO of Napier AI, commented: “AI has already become deeply imbedded into the financial infrastructure and the challenge is not whether or not AI will be used, but whether it is being governed in a way that is transparent, explainable and resilient at scale.
The lack of specific laws and regulations around to governance of AI and the fragmented accountability is ultimately what will bring about the most damage as and when any major AI related incidents should occur. By embedding transparency, audibility and regulatory alignment into AI systems, the UK can harness innovation while safeguarding financial stability and preventing fraud and financial crime.
The opportunity now is to move beyond high-level principles and put in place practical, coordinated governance that supports both innovation and confidence.”
The report discerns the need for a coherent national approach to the governance of AI risk management, particularly in regulated sectors. It is the responsibility of the government, the Bank of England and the Financial Conduct Authority to ensure protections are in place so as the UK’s AI ambitions are pursued and we continue to grow at scale, we can do so responsibly and safely.