The EU Artificial Intelligence Act (AI Act) is a landmark piece of legislation designed to regulate AI systems according to their risk levels and ensure the protection of fundamental rights. This paper focuses on the interplay between the AI Act and prudential supervision within the EU banking sector, with a particular focus on the role of the European Central Bank.
The study delves into the legal framework underpinning the ECB’s supervisory responsibilities, and prudential tasks. It assesses the obligations imposed by the AI Act on providers and users of high-risk AI systems in finance, highlighting the stringent requirements for transparency, accountability, and risk management.
Additionally, the paper examines the AI governance, hence the collaborative dynamics between the ECB, the AI Office, and the European AI Board. It underscores the importance of coordination in implementing AI governance frameworks, participating in regulatory sandboxes, and conducting real-world testing of high-risk AI systems.
The challenges and opportunities arising from the integration of AI into banking supervision are critically analysed. The paper advocates for a unified supervisory approach that balances the innovative potential of AI with prudential requirements, ensuring that ethical standards and financial stability are upheld.
This study contributes to the academic and regulatory discourse by providing insights into the evolving legal landscape governing AI in finance. It offers strategic policy recommendations to enhance the ECB’s oversight capabilities, facilitating the responsible integration of AI technologies while safeguarding the integrity of the financial system, proposing a pathway towards a more cohesive and effective regulatory framework for AI applications in the banking sector.