Harnessing AI Regulation for the Greater Good
In a speech this week, Steven Maijoor, the ESMA chair, reiterated how the democratisation of information and increased scope for AI applications presents a novel chance to build a better, more trusting future.
The notion that information can, in the most profound of ways, radically transform markets is clear. Combined with the fact that many digital systems are now capable of simulating human behaviour, we have an important heuristic for future regulations. Intelligence is no longer restricted to the domain of people. As the volume and use of data increases, the markets also change in response, across a wide range of areas.
For example, as the world of AI continues to develop, automated ‘expert’ advice will become more commonplace. Alongside other automated tools, customers will not only be able to confidently plan their finances, but also actively monitor and manage their debts and gain more information on financial products than ever before. Such egalitarian access and improved trust can also help widen access to investments at significantly lower costs than traditional professional advice, thus opening up opportunities that were once only the privilege of the few.
Equally, there are opportunities for regulators (“Suptech” AI-based mechanisms to identify possible insider trading and material misstatement are not far away) and the regulated (a host of “Regtech” technologies seek to automate and simplify compliance with complex regulations).
For Mr Maijoor, the main limiting factor in facilitating this opportunity is the breadth and scale of strategic AI implementations and their related investments. The increased use of such technologies in automating regulatory and compliance functions will thus play a significant role. In sum, finding the balance between investing in a brighter future, whilst also acknowledging the risks, is of fundamental importance to regulators in Europe and worldwide.
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