By Huw Jones and Iain Withers
LONDON (Reuters) – Britain’s Financial Conduct Authority (FCA) said on Wednesday there would be no rush to introduce detailed rules to regulate the rapidly developing use of artificial intelligence in financial services.
The European Union has approved a new law to regulate AI, now being increasingly used in everyday life and by companies, but other countries like Britain have yet to follow suit.
“We are not at the moment inclined to just jump in and write lots of detailed rules,” FCA CEO Nikhil Rathi told an event held by trade body the Investment Association.
“When you do that, almost by the time you’ve written the rules, they’re out of date.”
Use of AI in financial services is predicted to add 35 billion pounds ($44.68 billion) in revenue for UK firms over the next five years, according to a survey by the City of London Corporation and KPMG published separately on Wednesday.
Rathi said the FCA would with the Bank of England shortly take on powers to oversee critical third parties such as cloud computing providers, which would help provide oversight.
“We will want to ensure that they are meeting the standards of resilience that we need to keep our markets safe,” Rathi said.
Britain also has a regime for ensuring that senior managers at financial firms are directly accountable for how their actions ensure that markets remain stable, Rathi said.
As long as financial firms were delivering such outcomes, there is no need to rush in with new bespoke rules for AI in the financial sector, Rathi said.
“We are going to have to think about this very differently to other forms of technological development, or financial services evolution,” Rathi said.
Sarah ten Siethoff, deputy director at the U.S. Securities and Exchange Commission’s investment management division, said uses of AI were incremental, typically in back offices, but were starting to advance into more core investment functions.
The SEC has seen cases of “AI washing” where firms said they are using AI, even though they were not, ten Siethoff said.
Rathi said the FCA and BoE were also conducting a number of surveys of finance firms to understand how they were using AI and machine learning.
The EU’s securities watchdog ESMA said last week that banks and investment firms in the bloc cannot shirk boardroom responsibility and a legal obligation to protect customers under existing EU securities law when using AI.
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(Reporting by Huw Jones and Iain Withers; Editing by Jan Harvey, Alexandra Hudson)