Bank of England to Further Review the Use of Artificial Intelligence in the Financial Sector

Deputy Governor of BoE, Sam Woods (photo: x @BoECentralSouth)

JAKARTA - The Bank of England (BoE) will more closely examine the growing use of artificial intelligence by financial companies. However, Deputy Governor Sam Woods said on  Wednesday, December 6 that specific regulations aimed at artificial intelligence may not be the best way forward.

According to Woods, the use of machine learning and some types of artificial intelligence has been widely used for fraud detection and money laundering, but applications for other forms are still at an exploratory stage.

"We want to be technology agnostic in all our regulation," Woods said in a press conference after the BoE published its latest Financial Stability Report.

"Financial regulation specifically for artificial intelligence may not be the right way forward," he added.

He said the Bank's Financial Policy Committee would review artificial intelligence and machine learning next year to consider their risks to financial stability, in collaboration with other authorities.

According to the committee, artificial intelligence and machine learning can provide significant benefits to the financial sector by increasing operational efficiency, improving risk management, and providing new products and services.

However, wider adoption could pose systemic risks, such as amplifying herd behavior or increasing the risk of cyberattacks.

BoE Governor Andrew Bailey said everyone was learning quickly about artificial intelligence and should approach it with "eyes wide open".

"This, I think, has quite profound implications, potentially for economic growth and how the economy is shaped going forward," Bailey said.

"Companies using artificial intelligence need to understand exactly how the technology works," he added.

Woods said the BoE could consider what steps senior managers in the financial sector, who are directly accountable to the regulator, should take to ensure that "what comes out of the black box actually makes sense".

The BoE has just been given new powers to oversee how banks use third parties, such as cloud providers, for critical services.

"So if it becomes the case that the financial system becomes heavily reliant on providers of artificial intelligence technology, perhaps that would be a candidate for a new use of those powers," Woods said.