Industry engagement essential, executive says
The Financial Markets Authority (FMA) is engaging with the industry to understand the impacts of generative artificial intelligence (gen AI) on the financial sector, highlighting both the technology’s potential benefits and inherent risks.
Navigating Gen AI’s potential
Daniel Trinder (pictured above), executive director of strategy and design at FMA, stressed the importance of industry engagement to grasp how gen AI contributes positively to consumer and market outcomes and how firms are managing its risks.
“Industry engagement will be essential for the FMA to understand how gen AI is achieving positive consumer and market outcomes, as well as how risks are being managed by firms," Trinder said.
This engagement aims to explore gen AI's applications, which are still in their infancy but have the potential to transform financial services significantly.
See LinkedIn post here.
Benefits and risks of gen AI
Gen AI promises enhanced consumer outcomes and personalised experiences, with advancements in fraud detection and risk management. However, alongside these benefits, Trinder noted potential risks, including cyber threats and the potential for AI to be weaponised by criminals.
“New Zealand banks have said recently that gen AI is a ‘double-edged sword’,” he said, underscoring the need for balanced governance and oversight.
Governance and operational resilience
Trinder pointed out the necessity for firms to reassess governance approaches to ensure adequate oversight of AI tools and to maintain operational resilience, especially in light of the digital infrastructure and third-party-related stability risks associated with cloud-based gen AI models.
Despite the challenges, FMA is optimistic about firms mitigating these risks through appropriate governance structures and risk management strategies.
“Over time, we will assess whether our regulatory framework needs strengthening to support better deployment of gen AI,” Trinder said.
Trinder said the regulator remains committed to a technology-neutral and pro-innovation stance, encouraging firms to harness gen AI’s opportunities while focusing on consumer safety and market enhancement.
Read the FMA article in full here.
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