EU watchdog says banks must take full responsibility when using AI


AI Artificial intelligence words, miniature of robot and EU flag are seen in this illustration taken December 21, 2023. REUTERS/Dado Ruvic/Illustration

LONDON (Reuters) - Banks and investment firms in the European Union cannot shirk boardroom responsibility and a legal obligation to protect customers when using artificial intelligence (AI), the bloc's securities watchdog said in its first statement on AI.

The European Securities and Markets Authority (ESMA) on Thursday set out how financial firms regulated in the 27-country bloc can use AI in day-to-day operations without falling foul of the EU's MiFID securities law.

While AI holds promise in enhancing investment strategies and client services, it also presents inherent risks, and the potential impact on retail investor protection is likely to be significant, ESMA said.

"Importantly, firms' decisions remain the responsibility of management bodies, irrespective of whether those decisions are taken by people or AI based tools," ESMA said.

"Central to the use of AI in investment services is the unwavering commitment to act in clients' best interest, an overarching requirement which applies irrespective of the tools that the firm decides to adopt in the provision of services."

The statement covers not just instances where AI tools are developed or adopted by a bank or investment firm itself, but also the use of third-party AI technologies, such as ChatGPT and Google Bard, with or without the direct knowledge and approval of senior management, ESMA said.

"The firm's management body should have an appropriate understanding of how AI technologies are applied and used within their firm and should ensure appropriate oversight of these technologies," ESMA said.

The statement focuses on compliance with MiFID, and is separate from the EU's landmark rules on AI that come into force next month, setting a potential global benchmark for a technology used in business and everyday life.

Efforts are also underway at the global level by the Group of Seven economies (G7) to put in place guardrails to develop the rapidly evolving technology safely.

(Reporting by Huw Jones; Editing by Sharon Singleton)

Follow us on our official WhatsApp channel for breaking news alerts and key updates!

   

Next In Tech News

UN chief tells consumer tech firms: own the harm your products cause
Music labels sue AI companies Suno, Udio for US copyright infringement
Foxconn to invest $383 million in Vietnam circuit board plant, says state media
Riot Platforms seeks three board seats at Bitfarms after thwarted takeover bid
Shopify expands access to its AI-powered features to attract more businesses
CDK hack upends US auto industry, sending dealers back to paper forms
Beyond Nvidia: The search for AI’s next breakthrough
For this CEO, a creative culture is one where people trust they can speak up
Microsoft’s Copilot will let you join three meetings at once, but experts say it misses the point: ‘No one has ever wanted to be in a meeting’
Hikes, nosy neighbours afflict Zimbabweans in quest for mobile connection

Others Also Read