Parliamentary committee warns of overlap between EU AI rules and financial regulation

The European Parliament’s Committee on Economic and Monetary Affairs has adopted a report on AI in financial services. The committee, known as ECON, uses the report to raise concerns about regulatory overlaps which could hinder the uptake of AI in the financial services sector. It believes that, for the most part, financial legislation is capable of covering AI risks.

Updates to the report

The reports builds on the draft published earlier this year (see our previous blogpost: European Parliament drafts demand for Commission to spell out how financial regulation applies to AI). The latest version:

• warns EU regulators not to discourage innovation through disproportionate compliance burdens,

• notes the lack of AI-specific expertise at regulators,

• reiterates that EU firms are reliant on a small number of third party providers, and

• urges EU and national regulators to monitor the risk of herd behaviour as a result of this concentration of AI service providers.

DORA overlay

The EU’s Digital Operational Resilience Act started to apply earlier this year. DORA requires EU financial entities to update their contracts with technology service providers.

The report calls on the European Commission and European Supervisory Authorities to assess the feasibility of applying DORA’s exit strategies and transition provisions to AI models, especially for service providers based outside the EU.

Overlap with AI-specific rules

ECON expresses concern that there are regulatory overlaps between the EU AI Act and financial regulation. The report says these overlaps introduce undue complexity, compliance burdens and legal uncertainty which hinder firms’ uptake of AI. Reliance on existing frameworks is mainly sufficient to cover AI deployment.

The report asks the Commission and national regulators to address this concern. For example, it looks ahead to the Commission’s upcoming Digital Omnibus package which is expected to propose simplifying some aspects of the AI Act. It also notes that the Commission can reconsider the Act’s list of high-risk AI use cases.

More guidance to come?

ECON calls on the Commission to provide clear and practical guidance on the application of existing EU financial legislation to the use of AI. The Commission is told to work with the European Supervisory Authorities, national regulators and other stakeholders to develop this guidance which should include consistent definitions and avoid duplicated requirements, particularly for risk assessment reporting.

The report also instructs the Commission to explore how AI tools can be used to support the EU’s Savings and Investments Union.

Next steps

The European Parliament is due to vote on the report in a plenary session later this month. In the meantime, the Commission is expected to publish its Digital Omnibus proposals on 19 November.