ECB Recommends Changes to Proposed Rules on Artificial Intelligence

ECB welcomes the objective of the proposed regulation to improve the functioning of the internal market by laying down a uniform legal framework for the development, marketing, and use of trustworthy artificial intelligence in conformity with the European Union values. ECB also welcomes the proposed regulation’s intention to avoid overlaps with the existing legislative framework by subsuming some of its provisions into the relevant provisions of the Capital Requirements Directive (CRD). Concerning high-risk artificial intelligence systems provided or used by credit institutions, ECB understands that the proposed regulation integrates certain obligations into the procedures set out in CRD. In particular, the proposed regulation aims to enhance consistency with the CRD by integrating some of the providers’ and users’ risk management and governance obligations into the internal governance system of credit institutions. Because of the novelty and complexity of artificial intelligence and the high-level standards of the proposed regulation, ECB opines that further guidance is necessary to clarify supervisory expectations with regard to the obligations in relation to internal governance.

Under the proposed regulation, the vast majority of credit scoring activities making use of artificial intelligence systems would be automatically subjected to the horizontal minimum requirements imposed on high-risk artificial intelligence systems. Consequently, several activities, including acquisition targeting for marketing, collections modeling, and standard credit scoring models would need to comply with the same requirements. To enhance clarity in supervisory expectations and in line with the technology-neutral approach of ECB, it is suggested that artificial intelligence systems intended to be used to evaluate the creditworthiness of natural persons or establish their credit score should not be classified as high-risk artificial intelligence systems, provided that the impact of such approaches to the assessment of natural persons’ creditworthiness or credit score is minor. As credit scoring activities are regularly carried out by credit institutions in day-to-day practice, ECB suggests that the entry into effect of requirements that relate to the qualification of artificial intelligence systems intended to be used to evaluate the creditworthiness of natural persons or establish their credit score as "high-risk artificial intelligence systems" should be delayed until the adoption, by the European Commission, of common specifications on the matter. In particular, these common specifications should spell out the conditions under which high-risk systems in this field will be presumed to be in conformity with the applicable requirements. The common specifications should also define when artificial intelligence systems should be considered as "put into service by small scale providers for their own use" and, therefore, fall within the scope of the exception from the qualification as a high-risk artificial intelligence system.

Thus, the opinion notes that ECB should be included in the list of bodies consulted before the adoption of such common specifications, where they concern artificial intelligence systems intended to be used to evaluate the creditworthiness of natural persons or establish their credit score. ECB welcomes the possibility to update the list of high-risk artificial intelligence systems included in Annex III to the proposed regulation. ECB also emphasizes that the proposed regulation should be without prejudice to the more specific or stringent prudential obligations of credit institutions set out in sectoral regulation and supplemented by supervisory guidance. ECB would welcome further clarifications regarding the applicable requirements and competent authorities with regard to outsourcing by credit institution users of high-risk artificial intelligence systems. ECB also highlights that its role under the proposed regulation should be clarified, in particular on its general prudential supervisory competency in relation to the market surveillance and conformity assessment, and on the application of the proposed regulation to the performance of the ECB tasks under the Treaty.

Related Link: Opinion (PDF)

Keywords: Europe, EU, Banking, Artificial Intelligence, CRD, Basel, Credit Scoring, Opinion, Regtech, Lending, Loan Origination, Fintech, Suptech, ECB