AI is increasingly being used in finance and accounting Credit: Getty Images / amgun

The European Securities and Markets Authority (ESMA) has said banks and investment firms must take full responsibility for the protection of customers when using AI. 

On Thursday (30 May), the ESMA laid out how financial organisations can use AI without breaking the bloc’s Markets in Financial Instruments Directive (MiFID) regulation.

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Financial firms’ decisions “remain the responsibility of management bodies, irrespective of whether those decisions are taken by people or AI-based tools,” ESMA said.

“Central to the use of AI in investment services is the unwavering commitment to act in clients’ best interest, an overarching requirement which applies irrespective of the tools that the firm decides to adopt in the provision of services,” the watchdog added. 

The ESMA’s statement is separate from the EU’s AI Act which comes into force in June and focuses on compliance with MiFID. 

“The firm’s management body should have an appropriate understanding of how AI technologies are applied and used within their firm and should ensure appropriate oversight of these technologies,” ESMA said.

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The statement also covers third-party AI tools such as ChatGPT as well as AI models that have been developed in-house, with or without the direct knowledge of senior management, according to ESMA.

In banking, AI use cases range from enhancing client interactions through chatbots to providing better loan terms through data-driven risk assessments, and the automation of laborious back-end processes.

The AI platform revenue in the retail banking industry was worth $1.8bn in 2019 and is expected to achieve a compound annual growth rate of more than 21% during 2019-2024, according to GlobalData’s AI in Banking report.

The digital revolution in banking is driving incumbent banks to defensively adopt leading technologies to combat the nascent threat posed by disruptive fintech firms, according to the report.