AFM and DNB publish report on the impact of AI on the financial sector and supervision

Dutch financial institutions have been using AI for some time

Dutch financial institutions have been using AI for some time now and are experimenting with more advanced AI models, which suggests that the use of AI will continue to grow in the years to come. AI is used for fraud prevention and detection, and to combat money laundering, terrorist financing and cyber crime, to assess creditworthiness and to verify identities. It also helps staff to work more efficiently. Many institutions say they are cautious about using generative AI at this moment, albeit they recognise the potential. Some are gradually starting to use it for support processes.

Both opportunities and risks

AI can mean better and faster services for customers and more personalised products. It offers financial institutions opportunities to grow their revenue by tapping into new customer groups, increasing cross-selling opportunities and optimising prices. Behind the scenes, AI can make processes more efficient, thus reducing the costs for institutions.

But there are also risks, including in the areas of data quality, data protection, explainability, incorrect results, discrimination and exclusion, and greater dependence on just a few big tech firms. These risks can have an impact on financial institutions and their customers, and therefore also fall within the supervisory sphere of the AFM and DNB.

Consequences for supervision

Financial institutions are expected to use AI responsibly, and existing regulations continue to apply in full. AI has consequences for the way in which the AFM and DNB supervise the sector. The AFM and DNB will need to expand their knowledge in this area to enable them to assess institutions’ use of AI, and in certain cases they will need to develop or adapt their regulatory methods and procedures.

The AI regulation will require financial institutions using AI to pay particular attention to the proper protection of fundamental rights. Where AI is used for financial services, the principle underlying the AI regulation is that the existing financial regulators will also take responsibility for monitoring compliance with the regulation, i.e. the AFM and DNB in the Netherlands. Broad coordination and collaboration between regulators of AI is desirable at both European and national level, especially in view of the particular risks to fundamental rights posed by AI systems.

AFM and DNB eager to engage with the sector

The AFM and DNB are eager to engage with the sector on this topic. The supervisory authorities spoke with several banks, payment institutions, insurers and pension administration organisations in preparation for this report. It is their intention to organise a symposium later this year as a follow up, along with a number of round table sessions.