EC AI in Finance High-Risk Use Cases

On Jun. 19, EU CMSN issued article assessing risks of AI in finance.

  • The AI Act, which is expected to enter in force in summer 2024, defines two high-risk use cases for financial sector if AI systems are used to evaluate creditworthiness of a person, and for risk assessments and pricing for life and health insurances of a person.
  • Follows EP May 2024 adopted regulation setting harmonized rules on AI, see #204700.
  • Follows EC Jun. 2024 began targeted consultation on AI in finance, see #216191.
  • EC Plans
  • The EC is now planning to gather input from financial services stakeholders to get an overview of how and for which purposes AI applications are used in the financial sector.
  • A targeted stakeholder consultation has been published, with workshops giving firms and consumer associations opportunity to present AI applications they are developing are being organized together with the ESAs as well as National Competent Authorities.
  • The overall benefits of using AI/Machine Learning (ML) systems in the financial sector include increasing forecast accuracy, mitigating risk of losses, automating processes, reducing costs, and increasing efficiency, and enhancing fraud detection/prevention.
  • AI systems can also help take more informed decisions by analyzing data from a wide range of sources, such as market trends, economic indicators and customer behavior.
  • However, AI comes with certain risks, some of which relate to the respecting of data protection regulations, while come concern AI system itself, including trustworthiness.
  • This is because an AI model can reproduce or even amplify biases and discriminatory patterns that were mirrored within the data that had been used to train the AI model.
  • Consultation Overview
  • The outreach of EC Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) sees targeted consultation as being in three parts.
  • It asks what are benefits and challenges for AI in finance, and if the existing financial rules are affected, for banking, securities, insurance, pensions, or asset management.
  • The last part of the consultation includes questions on the requirements linked to the AI Act and understanding the needs of the financial sector for its implementation.
  • The AI workshops, meanwhile, provide informal platform to showcase recent AI finance tools that are being used or developed, aiming to provide further insight into how AI in finance looks in practice, to offer opportunity to exchange ideas and foster innovation.
  • Effectiveness
  • The consultation is open for comments from relevant stakeholders until Sep. 13, 2024.

Regulators EU CMSN
Entity Types Bank; BHC; CNSM; Corp; IA; IB; Ins; Inv Co; MG Orig; MSB; Pension
Reference CP, PR 6/19/2024
Functions Compliance; Financial; Risk; Tax
Countries European Union
Category Central Government
Products AI; Banking; Cards; Corporate; Cryptocurrency; Deposits; Fund Mgt; Insurance; Loan; Mortgage; Payments; Pensions; Wealth Mgt
Regions EMEA
Rule Type Concept
Rule Date 6/19/2024
Effective Date 9/13/2024
Rule Id 216574
Linked to Rule :216191
Reg. Last Update 6/19/2024
Report Section EU

Last substantive update on 06/24/2024