AI in the Vault: AI Act's Impact on Financial Regulation

Bocconi Legal Studies Research Paper No. 4898828

Loyola University of Chicago Law Review, 2025, Volume 56, Forthcoming

44 Pages Posted: 22 Aug 2024 Last revised: 30 Dec 2024

See all articles by Maria Lucia Passador

Maria Lucia Passador

Bocconi University - Department of Law; Harvard University - Harvard Law School; European Banking Institute

Date Written: July 01, 2024

Abstract

This Article examines the implications of the European Union’s Artificial Intelligence Act (AI Act) on the regulatory landscape of AI in the banking and financial sectors. 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 study 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.

The importance of this research lies 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. 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.

Our research questions center on 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.

Key findings of this study reveal 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.

Keywords: Artificial Intelligence Act, AI governance, banking supervision, financial regulation, prudential supervision, AI risk management, AI Office, European AI Board, GPAI models, ethical AI

Suggested Citation

Passador, Maria Lucia, AI in the Vault: AI Act's Impact on Financial Regulation (July 01, 2024). Bocconi Legal Studies Research Paper No. 4898828, Loyola University of Chicago Law Review, 2025, Volume 56, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4898828 or http://dx.doi.org/10.2139/ssrn.4898828

Maria Lucia Passador (Contact Author)

Bocconi University - Department of Law ( email )

Via Roentgen, 1
Milan, Milan 20136
Italy

Harvard University - Harvard Law School ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

European Banking Institute ( email )

Frankfurt
Germany

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