The Bank of England (BoE) and the Financial Conduct Authority (FCA) have launched a new initiative to assess the opportunities and risks posed by artificial intelligence (AI).

The Artificial Intelligence Public Private Forum is aimed at facilitating dialogue between the public and private sectors to better understand the use and impact of AI in financial services, to help further the BoE's objective of promoting the safe adoption of such technology.

The forum, which is expected to run for one year, will consist of a series of quarterly meetings and workshops structured around three topics: data, model risk management, and governance.

In terms of membership, it will draw on the knowledge and experience of 21 AI experts from across the financial and technology sectors as well as academia. The forum also has observers from the Information Commissioner’s Office and the Centre for Data Ethics and Innovation.

A statement explained that the specific aims of the forum are: firstly, to share information and understand the practical challenges of using AI in financial services, identify existing or potential barriers to deployment, and consider any potential risks or trade-offs.

Secondly, to gather views on areas where principles, guidance, or regulation could support safe adoption of these technologies. And finally, to consider whether once the forum has completed its work ongoing industry input could be useful and if so, what form this could take.

At its launch today, Dave Ramsden, the BoE's deputy governor for markets and banking, said that he is seeking to expand dialogue between the public and private sectors in order to better understand the use of AI in financial services.

He pointed out that the Coronavirus has focussed interest in the potential uses of AI in tackling some of the many immediate problems and challenges precipitated by the crisis.

"For example, many businesses, including financial firms, are looking to use AI, sometimes combined with alternative data sources, for enhancing customer engagement, for driving more automation of internal processes, and for improving virtual working environments."

In a recent survey of the banks and insurers, conducted as part of ongoing monitoring of the impact of COVID-19 by the BoE’s Fintech Hub - along with colleagues from the Prudential Regulation Authority - around 45 per cent reported that the crisis has led to an increase in the importance of AI and data science applications for their future operations, with around 55 per cent reporting no change, and none noting a decrease.

"While the use of AI has clear benefits in an increasingly data-driven economy, there are risks and challenges," said Ramsden, adding that to start with, good data management and governance are essential in controlling issues with, for example, biases that may be embedded in the data.

"At the model level, we need to think about issues such as ensuring that models continue to perform under a wide range of different conditions and being able to explain the outputs of complex AI systems," he continued. "Moving to the firm level, some of the key issues will revolve around risk management and governance structures; around accountability and appropriate controls.

"And finally, for the financial system as a whole, AI may amplify network effects such as unexpected changes in the scale and direction of market moves," stated Ramsden.

In terms of the regulatory challenges, he said that it's clear that policy thinking in this arena is also evolving rapidly. "But the existing regulatory landscape is somewhat fragmented when it comes to AI, with different pieces of regulation applying to different aspects of the AI pipeline, from data through model risk to governance."

He concluded by arguing that policy must strike a balance between high-level principles and a more rules-based approach. "We also need to future-proof our policy initiatives in a fast-changing field."

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