The Bank of England (BoE) and the Financial Conduct Authority (FCA) have jointly launched an Artificial Intelligence Public-Private Forum, with a view to open up the dialogue about Artificial Intelligence (AI) between the private and public sectors. The Forum, it is hoped, will allow both sectors to come together to understand the use and impact of AI within financial services. So far, it is composed of 21 leading AI experts across finance, technology and academia – as well as observers from the Information Commissioner’s Office and the Centre for Data Ethics and Innovation. However, the BoE has hinted that it may welcome more members.
Plans for the Forum were initially set out in June 2019, in response to the Future of Finance Report, however, it was not successfully launched until 12 October 2020. It will run for one year and will present a number of opportunities for discussions, with meetings and workshops intended to explore three topics in particular: data, model risk management and governance.
In his opening remarks at the launch of the Forum, BoE Deputy Governor for Markets and Banking, Dave Ramsden, noted that it has three key aims:
- To share information and understand the practical challenges of using AI in financial services and to identify barriers to deployment
- To gather views on areas where principles, guidance or regulation could support safe adoption of AI
- To consider whether – once the Forum’s work is completed – ongoing industry input will be useful, and what form that could take
CUBE comment: regulatory clarity on the horizon?
Ramsden used the Forum’s launch to comment on the increased use of AI, noting that “AI and Machine Learning are growing very rapidly in complexity, sophistication and importance for society, the economy as a whole, and financial services in particular.” He added that it is likely that financial firms will benefit from AI in terms of making “making efficiency and productivity gains, in tailoring products to customers’ needs, and in more effective ways of combating financial crime.”
This is the latest in a string of messages from financial regulators, not simply noting the existence of smart technologies, but advocating them. Covid-19, it seems, has played a part in pushing technology to the top of the agenda of firms and regulators alike. As Ramsden noted, a recent survey by the BoE’s FinTech Hub, in association with the Prudential Regulation Authority (PRA) found that 45% of participating firms said that the coronavirus pandemic had led to an increase in the importance of AI and data science applications for future operations.
Of course, Ramsden did not fail to note that with innovation comes risks – in particular those surrounding risk management, governance structures, accountability and controls. However, he added that the banks and the regulator are aware of the rapidly evolving policy thinking within the field of AI, and that the regulatory landscape surrounding the field is “somewhat fragmented”.
At CUBE, we have our fingers crossed that the Forum, as well as other examples of an injection of interest from regulators about technology, are a sign of impending regulatory clarity. Of course, with regulatory clarity comes new or amended legislation…regulatory change is on the horizon. Financial institutions should ensure they have the systems and controls in place to manage it effectively.