Global Trustee and Fiduciary Services Bite-Sized Issue 10 2024

4 QUICK LINKS CBDC CRYPTOASSETS FINTECH LIBOR TRANSITION OPERATIONAL RESILIENCE PRIIPS SUSTAINABLEFINANCE/ESG T+1 ASIA/PACIFIC EUROPE NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 10 | 2024 Research Paper on Generative Artificial Intelligence in the Financial Services Sector On 27 September 2024, the Hong Kong Monetary Authority (HKMA) published a circular addressed to the Chief Executives to all Authorized Institutions (AIs), informing them of the publication of a Research Paper on Generative Artificial Intelligence (GenAI) in the Financial Services Sector. Under the auspices of the “All banks go Fintech” initiative of its “Fintech 2025” strategy, the HKMA says it has been working closely with other financial regulators to promote cross-sectoral adoption of Fintech, with AI being a key area of focus. The research paper provides insights into the current state of GenAI adoption within the financial sector, highlighting key applications and challenges identified through interviews with financial institutions and technology solution providers. It also outlines the critical risk management considerations associated with GenAI, including data privacy, cybersecurity, information inaccuracy and algorithmic bias, and offers recommendations for governance structures and deployment approaches to support responsible innovations. The HKMA says it encourages all AIs to review the paper and consider how GenAI can be thoroughly tested, such as through the HKMA’s new GenAI Sandbox, and responsibly integrated into AIs’ operations, service offerings and risk management systems. Link to Circular here Link to Research Paper here Bank of England Establishes AI Consortium On 25 September 2024, the Bank of England (BoE) announced the establishment of an Artificial Intelligence (AI) Consortium. Its purpose is to provide a platform for public-private engagement to gather input from stakeholders on the capabilities, development, deployment and use of AI in UK financial services. Its specific aims are to: • Identify how AI is or could be used in financial services, for example, by considering new capabilities, deployments and use cases as well as technical developments where relevant. • Discuss the benefits, risks and challenges arising from the use of AI. Such benefits, risks and challenges may be with respect to financial services firms or with respect to the wider financial system. • Inform the BoE’s approach to addressing risks and challenges, and promoting the safe adoption of AI. The BoE also issued a call for interest for membership of the AI Consortium. Applicants are invited to provide a summary of their suitability to join the AI Consortium, covering both their current role, and relevant experience in regard to AI and its use in financial services. Applicants are also asked to briefly outline a topic that could be discussed in one of the quarterly meetings, explaining its relevance and importance. The BoE will review all applications and select around 30 members. Link to the AI Consortium Terms of Reference here Link to the Call for Interest here Over 100 Companies Sign EU AI Pact Pledges On 25 September 2024, the European Commission (EC) announced that over a hundred companies had become the first signatories of the EU AI Pact and its voluntary pledges. The signatories include multinational corporations and European small and medium enterprises (SMEs) from diverse sectors, including IT, telecoms, healthcare, banking, automotive, and aeronautics. The Pact supports industry’s voluntary commitments to start applying the principles of the AI Act ahead of its entry into application and enhances engagement between the EU AI Office and all relevant stakeholders, including industry, civil society and academia.