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.
By adopting a wait-and-see approach, the major public financial
institutions, which are responsible for protecting consumers and
maintaining stability in the UK economy, are not doing enough to
manage the risks presented by the increased use of AI in the
financial services sector.
According to evidence received by the Committee, more than 75% of
UK financial services firms are now using AI, with the largest
take-up among insurers and international banks. 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.
In the report published today, MPs acknowledge that AI and wider
technological developments could bring considerable benefits to
consumers. The Committee, therefore, encourages firms and the FCA
to work together to ensure that the UK capitalises on AI's
opportunities.
However, 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.
The Critical Third Parties Regime was established to give the FCA
and the Bank of England new powers of investigation and
enforcement over non-financial firms which provide critical
services to the UK financial services sector, including AI and
cloud providers. The Government is responsible for deciding which
firms are brought into this regime.
The report notes that, despite being set up for more than a year,
no organisations have yet been designated under the regime. The
Committee urges the Government to designate AI and cloud
providers deemed critical to the financial services sector in
order to improve oversight and resilience.
Chair comments
Chair of the Treasury Select Committee, Dame , said:
“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.
“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.”
