Machine Learning: A Regulatory Puzzle
A Regulatory Discourse?
As the capabilities of machine learning technology continue to progress rapidly into 2020, the need for regulators to remain informed on its implications in not only the proceeds of commerce, but of public life, has never been more necessary. The Bank of England (BofE) and the Financial Conduct Authority (FCA) has taken note of this issue and responded in full. The launch of the Financial Services Artificial Intelligence Platform (AIPPF) was jointly announced by the Bank of England and FCA on January 23rd, 2020.
The primary function of this platform is to streamline the transfer of data between regulatory bodies and FinTechs that develop and contract the software to private institutions as well as the institutions that use the technology (usually high street banks). As banks and other private financial institutions rely more heavily on machine learning and artificial intelligence (AI) to efficiently execute tasks such as financial reporting, the margin of error compared to human discretion is slightly higher.
The higher risk is due to numerous potential causal factors, including a system-wide malfunction or local power cut, for example, that can possibly lead to a late financial report being sent to regulators including the BofE and FCA. A financial penalty is generally imposed on late reports, which causes a loss in revenue for institutions using such technologies.
How Does the Platform Work?
The AIPPF is a proposed solution designed to decrease the risk of institutions’ reliance on machine learning and AI when it comes to transferring data to regulators. The platform functions as an invitation-only, at the behest of the BofE or FCA, forum dedicated to transferring data between private institutions who develop AI, institutions that rely on machine learning and regulatory bodies.
The platform will be chaired by experienced members of both the FCA and BofE, including Christopher Woolard, who is the Executive Director of Strategy and Competition at the FCA, and Sir Dave Ramsden, a distinguished Deputy Governor for Markets and Banking at the BofE.
Will the Platform Work?
The establishment of the AIPPF can be recognised as a step in the right direction in regard to increasing the discourse surrounding the future of AI and machine learning. With banks and regulators working closer together on developing risk-management strategies, guidelines for good practice, and discovering potential barriers for the distribution of such technology through the AIPPF, the regulatory future of consistently evolving technology can be seen as more secure than previous times.
by Brighton Dube