Immediate Impact of AI Evident FSC Issues Guidelines on the Application of Artificial Intelligence AI in the Financial Industry
The Financial Supervisory Commission (referred to as the FSC) announced today the release of the “Guidelines for the Use of Artificial Intelligence (AI) in the Financial Industry”. The purpose of these guidelines is to encourage financial institutions to make good use of technology, with responsible innovation at its core, by applying reliable AI to develop financial services that better meet the needs of the public.
Table of Contents
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Reasons for the FSC’s promotion of AI measures
Guidelines for the use of AI in the financial industry
General provisions
Six chapters
Key explanations of the guidelines
Chapter 1: Risk management
Chapter 2: Use of generative AI
Chapter 3: Protection of customer privacy
Chapter 4: System interpretability and transparency
Administrative guidance nature
On October 17, 2023, the FSC released the “Core Principles for the Use of Artificial Intelligence (AI) in the Financial Industry and Related Policies”, and subsequently drafted the content of the guidelines based on these core principles. During this period, the FSC referred to relevant guidelines issued by other national governments and international organizations, and solicited opinions from various sectors, experts, and scholars through public policy participation platforms, fintech-related conferences, and second AI guideline consultation meetings. After multiple adjustments, the “Guidelines for the Use of AI in the Financial Industry” have finally been released today as a reference for financial institutions to introduce, use, and manage AI.
The “Guidelines for the Use of AI in the Financial Industry” released this time mainly consist of general provisions and six chapters:
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The general provisions mainly explain the definitions related to AI, the AI system life cycle, factors to consider in risk assessment, the way to implement core principles based on risk, and the supervision and management of third-party vendors.
The six chapters respectively explain the key points to be focused on and the measures that can be taken by the financial industry in implementing the six core principles, based on the AI life cycle and the assessed risks, including the purpose, main concepts, corresponding precautions for each principle, and the implementation methods or measures.
The risk management of financial institutions may involve external reviews. The guidelines stipulate that financial institutions may establish mechanisms for review and evaluation conducted by independent third parties with AI expertise, depending on their own expertise and resource levels.
Considering that financial institutions may not have complete control over the results generated by generative AI, but in order to ensure the fairness and human controllability of AI systems, the guidelines require financial institutions to implement risk controls for generative AI developed by third-party vendors.
The guidelines refer to the European Union’s General Data Protection Regulation (GDPR) and require financial institutions to adopt the “data minimization principle” to avoid collecting excessive or unnecessary information.
Financial institutions should ensure the interpretability of AI systems. However, considering that if AI systems are developed or purchased from other vendors, it may not be possible to fully understand the operational details of the systems due to commercial confidentiality. Therefore, the “interpretability” is limited to financial institutions being able to clearly explain how “self-developed or commissioned AI systems” operate and the logic behind their predictions or decision-making processes. In addition, in order to enhance market trust in AI systems, financial institutions can actively make stakeholders aware of their use of AI systems through the release of reports, technical documents, or disclosure of relevant information on their websites.
The FSC emphasizes that these guidelines mainly provide guidance for financial industry participants to pay attention to when introducing and using AI, and are of an administrative guidance nature. Financial industry-related associations that have established self-regulatory norms for the use of AI can refer to these guidelines and incorporate relevant key points and measures. If no relevant self-regulatory norms have been established, financial institutions are advised to refer to these guidelines for the introduction, use, and management of AI systems.
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