The U.K.'s top financial watchdog, which sifts through billions of card transactions as part of its monitoring of the country's top banks, is weighing adopting generative artificial intelligence to help examiners collect and synthesize that information.
Already the Financial Conduct Authority has assembled a team of over 500 technologists, including data scientists with AI experience, according to Jessica Rusu, the agency's chief data, information and intelligence officer. Those moves came as a bevy of Wall Street banks have been recruiting AI talent in recent years, she said.
"It's not always about being able to pay the highest salary and fight the war on talent," she said. "I think it really is about purpose."
Regulators around the world are grappling with how exactly they'll keep tabs on banks' growing use of artificial intelligence in their products and services, with many increasingly worried that it could introduce new forms of bias. At the same time, many watchdogs are experimenting with the technology as a way to become more efficient with their monitoring of major banks and financial firms.
Generative AI can produce anything from sentences to pictures to essays to poetry based on a user's simple questions or commands. The technology typically creates this new work after being trained on vast quantities of preexisting material.
Rusu said her agency is also aware that generative artificial intelligence can also sometimes hallucinate, a term coined by developers for when large language models generate answers that sound convincing but aren't true.
"It's a great tool for synthesizing information, we are of course aware of the hallucination bias, so the information that you get from it is not always 100% accurate," Rusu said. Still, she argued, "generative AI is going to be very useful as a productivity tool for firms."
Overt Focus
Finance and technology firms have cautioned U.K. regulators against heavy-handed rules governing artificial intelligence, saying they shouldn't try to define the nascent technology at present.
The Prudential Regulation Authority and Financial Conduct Authority said discussions with 54 companies and industry bodies produced no clear consensus on the potential benefits or risks of AI, according to a paper
Finance giants such as Moody's Inc. and Wall Street bank JPMorgan Chase are already experimenting with AI to cut costs, speed up processes and spot trends, creating thousands of jobs as they explore new use cases.
While some companies told regulators they'd like international watchdogs to work together on fragmented areas such as data protection, others said aspects like governance can be managed under existing rules such as the Senior Managers' Regime.
Opinions were also split on the dangers of bias within AI, with some saying it could be used to spot unfair treatment of certain consumers. The findings are the latest to emerge from several years of work on AI by U.K. regulators as they try to understand the risks to the financial system.
"I think it's important not to get overly focused specifically on AI — AI has been evolving for quite some time," Rusu told parliament's science, innovation and technology committee on Wednesday.
"I think what we should be concerned about is our overarching digital infrastructure, our reliance on the cloud and those large providers, as well as cybersecurity and other risks as they emerge," she said.
Market Impact
Prime Minister Rishi Sunak said separately on Thursday that world leaders should hold back from regulating artificial intelligence before they've fully understood the rapidly developing technology — even as he outlined some of the risks it poses — in a speech setting the scene for next week's AI summit at Bletchley Park.
Still, the impact of AI on labor markets or the automation of financial markets "could cause social and geopolitical instability," according to
The European Union, meanwhile, is considering a three-tiered approach to regulating generative AI models and systems, which would make it the first Western government to impose mandatory rules, Bloomberg News has reported. In the U.S., creators of AI technology have adopted voluntary safety principles.
