The Financial Conduct Authority (FCA), the UK’s financial services regulator, recently published its approach to control the use of artificial intelligence (AI) in the financial services sector.
At present, the UK lacks an all-encompassing mandate regarding regulation of AI. The government is favouring a decentralised approach that provides guidance by sector instead of legislation that covers all industries. Its ongoing aim is to ensure the UK remains a fertile ground for AI innovation via practical and flexible regulations.
In its AI update, the FCA noted that respondents and stakeholders in the financial services industry are mainly supportive of an approach to using AI focused on outcomes with a principal basis that is technology agnostic.
The FCA has selected to apply its current regulations and rules and regulations to five principles outlined by the UK government to govern how AI is employed in the sector. These include “fairness”, “transparency and explainability”, “accountability and governance”, “Safety, Security and Robustness” and “Contestability and Redress”.
A 2024 study from The Bank of England reported that 75% of firms in the sector were already employing AI, with a further 10% planning adoption in the next three years. AI is revolutionising SME business loans through multiple key mechanisms, producing a lending environment that is more accurate, faster and designed for increased accessibility.
The FCA stated it will monitor AI adoption in UK financial markets closely, keeping the question of whether the current approach requires regulatory amendments under review.
