Released on October 11, the Bank of England’s (BoE) Discussion Paper (the Paper) on Artificial Intelligence (AI) and Machine Learning (ML) aims to encourage debate and discussion on the challenges associated with the use and regulation of artificial intelligence (AI).
While there are many benefits to consumers, competition, firms and financial markets, the use of AI in financial services presents challenges from data, models and governance perspectives. These risks and outcomes are relevant to supervisory authorities and multiple areas have been identified in terms of guidance:
Data-related – data quality, data privacy, data infrastructure, and data governance
Model-related – model development, validation, and review processes
Governance-related – proper procedures, clear accountability, and effective risk management
The Paper outlines principles of current guidance that are relevant to identified AI risks and discusses AI as it relates to supervisory authorities’ objectives:
Consumer protection
Competition
Safety and soundness of data, model risk management, governance, operational resilience, outsourcing and third party risk management
To gather structured feedback, the Paper ends with 19 questions pertaining to three overall topics a) supervisory authorities’ objectives and remits, b) benefits, risks and harms of AI, and c) regulation.
Responses and feedback are requested via email to DP5_22@bankofengland.co.uk by Friday 10 February 2023.