The Financial Conduct Authority announces its approach to regulating AI within financial services
Watch techUK’s Head of Financial Services, Andy Thornley, explain the FCA’s approach to regulating AI!
On 22 April, we hosted the Digital Regulation Cooperation Forum at a techUK conference where their Chair and CEO of the Financial Conduct Authority (FCA), Nikhil Rathi, announced in a speech, the publication of an AI Update by the regulator. The document sets out how the FCA will approach regulation of activities that utilise AI and was in response to a request from the Technology Secretary and City Minister to publish their plans.
The approach once again highlights that respondents to the Discussion Paper on the topic, DP 26/23, favoured a principles based and outcomes focused approach, rather than regulating the technology itself. They also pinned their approach to the five principles Government published in their AI White Paper. These were:
- Safety, security and robustness
- Appropriate explainability/transparency
- Fairness
- Accountability and governance
- Contestability/redress
The FCA set out they would also follow these principles and mapped their existing work, rulebooks and frameworks to these principles. For example, robustness was mapped to the work on operational resilience for critical third parties, accountability & governance to their Senior Managers and Certification regime, and fairness to the consumer duty.
Next steps
The FCA wants to gain an in-depth understanding of how AI is utilised in the sector and will undertake ‘diagnostic work’ to determine this – including the third edition of the Machine Learning survey in partnership with the Bank of England and will also collaborate with the Payment Systems Regulator.
The regulator will utilise the existing frameworks but will monitor the approach and may take further regulatory action or adaptations if required. They also flag the importance of domestic and international regulatory cooperation and will keep a focus on this and will utilse AI sandboxes and the new DRCF AI hub to support firms.
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Andy Thornley
Andy joined techUK in August 2022 as Head of Programme – Financial Services. His role includes leading techUK’s work in building a greater understanding of the 'technological art of the possible' in order to apply it to the reform and evolution of financial systems.
Ella Gago-Brookes
Ella joined techUK in November 2023 as a Markets Team Assistant, supporting the Justice and Emergency Services, Central Government and Financial Services Programmes.