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Abstract

The AI Act, a pioneering legislative framework, classifies AI systems based on their risk levels and mandates stringent requirements for high risk systems to ensure transparency, accountability, and protection of fundamental rights. This Article further addresses the critical intersection of AI technology and prudential supervision, highlighting the significant roles of the AI Office, and the AI Board in the governance and oversight of AI applications in finance.

Despite existing literature focusing on the integration of AI in banking supervision and the associated risks, gaps remain in understanding how these regulatory frameworks can effectively oversee AI's transformative impact on financial markets. This Article seeks to fill those gaps in its detailed exploration of the AI Act's potential to shape the future of AI governance in Europe, particularly within the financial sector, where the need for clear regulatory frameworks is most pressing. Central to this is the effectiveness and coherence of the AI Act in regulating AI within the EU banking sector, examining its implications for high-risk AI applications like creditworthiness assessments and the deployment of General-Purpose AI (GPAI) models.

This Article reveals that, while the AI Act provides a robust framework for AI governance, several challenges persist, including the need for better coordination between regulatory bodies and the development of supplementary guidelines to address emerging AI applications. These findings contribute significantly to both academic and regulatory discourses by providing insights into the evolving legal landscape governing AI in finance. They highlight the importance of adaptive regulatory frameworks that can safeguard ethical AI deployment while fostering technological advancements and protecting consumer interests. The study's comprehensive analysis of the AI Act offers valuable recommendations for policymakers and stakeholders, aiming to enhance the regulatory oversight of AI in the financial sector and ensure its responsible and effective use.

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