The European Council has approved the Artificial Intelligence Act, harmonising rules around the technology and adopting a risk-based approach that dictates stricter rules for projects that are more likely to cause harm to society.
The importance of such a regulation for the financial industry is highlighted by a recent report from Broadridge on digital transformation and next-gen technology, which noted that 94% of financial services firms in Europe were making some level of investment in AI. However, the survey also found that 54% believe financial firms should be allowed to self-regulate their adoption of AI.
It appears the industry may not be best pleased by the thought of greater vigilance around use of the technology. Although 43% agreed that the pace of technology innovation was moving faster than regulators could keep up with, more than half (51%) did not agree that AI should be tightly regulated. Just 31% believed that it should be, in light of its potential to cause major risks.
Alongside the law, the EC has established four governing bodies to ensure proper enforcement. These include an AI office within the European Commission, a scientific panel of independent experts to support enforcement activities, an AI board with representatives from member states, and an advisory form for stakeholders to provide technical expertise to both the AI Board and the Commission.
Through the adoption of this legislation, the Council aims to support the uptake of safe and trustworthy AI systems by both private and public across the single market, with consideration made to EU citizens’ fundamental rights.
Stimulating AI investment and innovation in Europe is also a priority for the Council. This, according to the Broadridge survey, is something that much of the industry agrees with – 41% stated that greater regulatory clarity on the use of new technology would encourage innovation. AI regulatory sandboxes are expected to be established for the development, testing and validation of new systems.
The act will enter into force next month, after being signed by the presidents of the European Parliament and the Council, and will begin to apply after two years.
Commenting on the Council’s decision, Tom Carey, president of global technology and operations at Broadridge, said: “The EU AI Act is a landmark piece of legislation designed to ensure the safe innovation and adoption of AI technologies across Europe — but is this what financial services firms want?
“Given that almost all firms we surveyed in Europe said they are investing in AI to some extent, the EU AI Act is going to have a significant impact when it is rolled out. Now is the time for organisations to take a closer look at the current governance and controls that they have in place, and identify any gaps that need addressing in order to become compliant with the new legislation.”
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