The EU supervisor holds boards accountable for artificial intelligence in banks

The European Securities and Markets Authority (ESMA) has issued its inaugural statement on artificial intelligence (AI), highlighting the non-negotiable responsibility of boards and the legal obligation of banks and investment firms to protect their customers when using artificial intelligence technologies. The statement, reported by Reuters, highlights how companies and banks regulated in the 27-nation European Union can integrate artificial intelligence into their operations without breaching EU securities law MiFID.

While AI offers promising advances in improving investment strategies and services for clients, it also poses significant risks. ESMA highlighted the potential impact on the protection of retail investors, urging companies to exercise caution.

“Importantly, company decisions remain the responsibility of governing bodies, regardless of whether these decisions are made by humans or artificial intelligence-based tools,” ESMA said. The watchdog insisted that a company’s duty to act in the best interests of customers is of the utmost importance, regardless of the technology used.

Read more: Meta and OpenAI CEOs support EU AI regulation

The EU directive covers AI tools developed or adopted internally by banks and financial institutions, as well as third-party AI technologies such as ChatGPT and Google Bard. This applies even when senior management is not directly aware of their use. The statement emphasized that company management must understand and oversee the use of AI technology in its operations.

“The company’s management body should have appropriate knowledge of the application and use of artificial intelligence technologies in its company and should ensure appropriate supervision of these technologies,” ESMA said.

The directive is an important clarification of MiFID compliance and differs from the EU’s comprehensive AI rules, which are due to come into force next month. The upcoming regulations are expected to set a global benchmark for managing artificial intelligence in both business and everyday life.

On a broader scale, Group of Seven (G7) economies are also working to establish international safeguards to ensure the safe development and deployment of rapidly evolving artificial intelligence technologies.

Source: Reuters