ANALYSIS: Financial firms operating in AI governance 'vacuum' - ZISHI webinar
24th March, 2025|Luke Jeffs
Financial services firms are working in a vacuum when it comes to the regulation of artificial intelligence, an expert has warned a webinar hosted by training firm ZISHI.
Sue Turner OBE, a leading artificial intelligence expert, told the webinar hosted by the London-based financial services training firm that tighter regulation of the use of artificial intelligence by traders is inevitable but currently there is ambiguity in this sector.
Turner said: “In financial services, we are used to the regulator saying do this but don’t do that but we have this vacuum at the moment where people are saying should I or shouldn’t I do it?”
The ZISHI webinar looked at how the increasing adoption of artificial intelligence poses some new questions for these firms when they think about governance.
Turner said: “Unlike the other types of governance that we are so used to in financial services, in AI governance there is very little laid down so it’s up to each individual leader to figure their way through this and that’s an uncomfortable place to be.”
This challenge is complicated for firms operating in many markets by regulators in different jurisdictions taking different approaches to AI regulation.
Turner said the European Union has its EU AI act coming into effect this and next year. The regulation, which Turner described as “detailed and prescriptive”, is flawed however because it was conceived before the advent of general purpose AI so the policy-makers have redrafted the regulation to include these models “which doesn’t really work”.
The UK is also complex. “The current government and the previous government have both been very clear that they don’t want to bring in legislation around AI. I guess that’s sensible because the technology is changing so much, what would they even start with?”
Turner continued that the British government has delegated AI oversight to sector regulators mindful that they need to strike a balance that delivers prudent regulation as well as innovation and growth.
She told the webinar: “The Prudential Regulation Authority looked at the risks and said they think their existing framework captures what is needed and they might issue guidance in the future so that wasn’t terribly helpful.”
“The Financial Conduct Authority has been better, they have given some more detailed guidance looking at new types of regulatory engagement, looking at testing the impact of AI on consumers and markets, and they have created a regulatory sandbox where firms can test out AI innovations. That’s more helpful.”
While there is uncertainty about the oversight of AI in finance, there is no doubt this area is only going one way.
Turner said the expenditure by big tech firms on AI is set to be double in 2025 what it was in 2023, and the financial services industry is firmly in their sights.
She cited an Accenture report that concluded the financial services sector is set to be more affected by AI than any other, with two fifths of financial services staff performing tasks that AI is good at.
Turner said, despite the regulatory uncertainty, there are steps that firms can take today to ensure they are in good shape when the relevant regulation comes through.
This includes “having an approach to AI governance that allows people to think through the excitement, what they could use AI for but also thinking about the consequences to using data in this way”.
She added: “As a minimum, get the leadership to think through, what are you using AI for, that’s whether the AI tools are developed by the business or third-parties. Secondly, how does it work? And then, have we got an overview of the risks? It always amazes me how few firms have AI on their risk register.”
ZISHI will host on Tuesday the second webinar in the two-part series. To register for AI and the Future of Leadership: Bricks and Mortar to Bits and Meta, click here.
