UK financial firms have identified the oversight of third-party AI systems as their top governance challenge, according to a joint survey released Monday by the Bank of England and the Financial Conduct Authority. The findings highlight significant hurdles in applying risk-management principles to AI models developed by external suppliers, with over half of the respondents citing this as a major difficulty.
Around half of the firms surveyed reported monitoring AI inputs, outputs, or data flows, indicating a growing awareness of the need for vigilance in AI governance. However, data protection and privacy rules emerged as the most frequently cited regulatory constraint on AI adoption, with 42 percent of respondents highlighting a high compliance burden.
The survey underscores the evolving landscape of AI integration in the financial sector, where firms are grappling with both technical and regulatory challenges. As AI continues to play a larger role in financial services, the ability to effectively manage third-party AI systems will be crucial for maintaining compliance and mitigating risks.