AI in our financial services: Already Impacting
On my final comment on Committee stage of the Financial Services and Markets Bill, now completed in the House of Lords, I want to focus on AI. Artificial Intelligence is already perhaps the most powerful element of financial services, not to mention our economy and society, its presence, power and, certainly, its potential.
One thing to grasp fully – AI is here – not just a thought for the future. If you’re seeking out a financial product, mortgage or de-materialized instrument, AI is most likely in the mix.
This may not feel newsworthy. You can’t move right now for chat about ChatGPT. Perhaps it’s proliferating all of this chat itself, a one ‘bot’ PR machine consuming all our conversations to its development. It is good, don’t get me wrong. I’m enjoying our conversations, but, as with any advance, we must be clear on what it is, and what it is not.
It is this clarity that we need when we come to consider the role, current and future for AI across, within and driving our financial services. It is for this reason that I put down a number of amendments to the Financial Services and Markets Bill – to have the Government comment on the record as to their view on the role of AI, now and next.
My amendments sought to push the Government on two points, first that the deployment of AI should be ethical and second that all financial services firms should have a designated AI officer.
My amendments in full:
Ethical use of artificial intelligence by companies in the financial sector
(1) The Secretary of State must by regulations provide that companies operating in the financial services sector who make use of artificial intelligence must ensure its use is in line with guidance published by the Centre for Data Ethics and Innovation (CDEI).
(2) Regulations under subsection (1) are subject to the affirmative procedure.”
I used CDEI purely for illustrative purposes to make a point about the need for both ethical guidance and a way to measure compliance. The second amendment in full:
Designated artificial intelligence officer
(1) The Secretary of State must by regulations provide that companies operating in the financial services sector who use artificial intelligence (“AI”) must have a designated AI officer.
(2) The AI officer under subsection (1) has responsibility for ensuring the— (a) safe, (b) ethical, (c) unbiased, and (d) non-discriminatory use of AI.
(3) The AI officer under subsection (1) also has responsibility to ensure that data used in any AI technology is unbiased.
(4) Regulations under this section are subject to the affirmative procedure.”
In putting forward these suggestions I referred to the work of the Bank and the regulators on this topic. As I said during the debate:
“A helpful Bank of England paper on this subject was put out on 11 October last year, lest anybody think that AI is something for the future and not for us to worry about in the Bill. In the paper, 72% of financial services businesses said that they already use, or are about to use, AI. None of them said that they believed that the current way in which they used AI was high-risk, while more than half said that they were currently constrained in their ability to deploy AI fully because of current regulations on the PRA and FCA.”
Similarly, addressing the technologies directly, I emphasized that I tried to take an approach that is neither irrational optimist nor pernickety pessimist:
“I am neither Panglossian nor po-faced about AI or, indeed, any of the other new technologies that we have in our hands. Yes, they are incredibly powerful technologies, but they are in our human hands in terms of how we design and deploy them.”
“The UK could be world-leading in the deployment of ethical AI; the financial services sector is as good a place as any to start.”
In relation to the AI officer:
“Somebody in every financial services institution in the UK needs to be a designated AI officer.”
Responding for the Government, Minister Penn stated:
“I assure my noble friend that the newly created Department for Science, Innovation and Technology is already developing a cross-economy, pro-innovation framework for AI regulation, underpinned by a number of cross-sectoral principles to strengthen the current patchwork approach to regulating AI directly.”
“Further proposals for the new regulatory framework will be published in a White Paper in the coming weeks.”
And this week, on Wednesday March 29, it came to pass. I will be writing more on the details of the White Paper in due course – but the Government’s consultation on the proposals is open until June and I would urge anyone with an interest or thoughts on the matter to get in touch.
Back to the debate Minister Penn tried to reassure us that “through our proposals for a new AI regulatory framework, we are building the foundations for an adaptable approach that can be adjusted to respond quickly to emerging developments.
“The vast majority of industry stakeholders we have engaged with agree that this strikes the right balance between supporting innovation in AI while addressing the risks.”
Clearly, AI is already well embedded in our financial services. Whether it is embedded well, few can say. A designated AI responsible officer in every financial services firm would certainly more than help with this. AI will be a gamechanger, it can be something which changes the game for the better for individuals and institutions, companies, cities, and countries alike. Along with the vast opportunity there are of course also valid concerns about the challenges.
An open letter published the same day as the Government’s AI white paper and signed by 1,125 AI experts (and Elon Musk) has called for a 6 month pause on advanced AI development saying powerful AI systems should only be developed “once we are confident that their effects will be positive, and their risks will be manageable.”
That’s it for my efforts during Committee stage of the Financial Services and Markets Bill. For another Bill, let’s end with Gates, understandably and unsurprisingly at the centre of all of this- ChatGPT again and Bill’s conviction that the Age of AI has begun. We all now have an urgent and important role to play in changing the game for the better and for the benefit of us all.