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How To Prepare Your Financial Services Firm For New EU AI Act

The world has been shaken by GPT and other AI models, the emerging possibilities of AI models has taken over every industry.

How To Prepare Your Financial Services Firm For New EU AI Act

Admin|17 August 2023

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What is the New EU AI Act ?

The world has been shaken by GPT and other AI models, the emerging possibilities of AI models has taken over every industry.

In the times when there have been endless discussions over the possibilities and its outcomes there is finally something we all were looking up to, a much needed act, a much needed regulation ‘EU AI Act’.

This act has varied benefits but in this article we will discuss and elaborate its effect on the BFSI sector. Global banking and financial service sector has compounded its annual growth rate of 12.3% .

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And thus this actor is putting emphasis on integrating artificial intelligence and machine learning to amplify productivity and cut down on cost.

The strong willingness of the industry to integrate AI applications led to the rise in question regarding the extent of usage, reliability , trust and ethics. All these critical questions have been flagged by the New AI Act.

Let’s walk through the article and unravel the relation between Big Data, Al and ML and the regulation circumscribing them.

What are the Regulation of the EU AI Act

In April 2023 the EU published the first draft of the AI Act in April 2023. The Act is adreses the organisations working on the AI frameworks and systems. It imposes strong implications for the BFSI sector stretching their business across European borders. Here is the list of complete implications across BFSI firms across EU borders.

  • With the new AI Act, the personal information will be protected by all means and thus protecting the tech users.
  • The act will prohibit the usage of certain AI applications , especially for BFSI.
  • The regulations also impose strict rules on the usage of the allowed AI applications , this will include a conformity assessment followed by a proper registration.
  • All the rules will be critical towards issues like risk mitigation, data governance, security and transparency.
  • Also, the inability to not comply with the rules and regulations imposed by the Act can cost hefty fines to the organisation can go as massive as 6 percent of the Global turnover.

Though all the rules and regulations are still in discussions, the final guidelines for BFSI are available in order for the organisation to be prepared.

What will be the impact on BFSI?

This act has some specific regulations only for the BFSI sector; it is advised to the organization belonging to this sector to keep a check with all the updates over this act. It would be great if you can consult some legal professionals and industry experts beforehand. Exact regulations can't be revealed but here are the explanations of the context around which these regulations will revolve.

  • No compromise with the ethics: The EU Act has all its implications to protect all the principles, Weather it is non discrimination or maintaining transparency all such factors must be taken care, any AI system used by the organisation must comply with all such factors, especially the ones used for loan approvals, credit scoring and insurance.
  • Data governance: The BSI sector is one such sector that involves the sharing of personal data, and thus a strong data governance is required so that no security breach can take place. This will involve consent approval for accessing the data and assuring that no sensitive financial information gets compromised by any means.
  • Regulating oversight: the act proposes the formation of a supervisory board and an artificial intelligence board to regulate and monitor the compliance , application and audits.
  • Market analysis: All financial institutions need to reassess their AI strategies and the usage of the applications. Also some firms need to replace the existing AI systems with the ones complying with the new imposed regulations.

Fine Print

Qualimtrix leaves no stone unturned to keep its readers updated with everything that surrounds tech, whether it's some software, testing techniques or a new update in the news world. We keep you up with everything. So in this article we explored the AI act for you , hope you liked it and will keep reading the upcoming blogs, Also if you have been reading us last week you must be knowing about the vietnam - Cambodia ESC event and the membership benefits around it , if not we are announcing it here and we request you to read our previous article you know everything in detail. And mind you if you are a tech person, CEO of a tech company , software developer or tester looking forward to avail some benefits from the government in the name of networking or promoting your services, the previous article holds immense meat for your appetite.