Regulator seeks industry feedback on AI, quantum computing

Canada’s financial services supervisory regulator is seeking input from federally regulated financial institutions (FRFIs) on how they are adopting artificial intelligence (AI)/machine learning (ML) into their operations.

The Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC) also wants to know how ready institutions are for the emerging technology of quantum computing.

In a Dec. 20 letter to FRFIs, OSFI encouraged companies to complete a voluntary questionnaire.

“The intent of the questionnaire is to give an understanding of the uses of artificial intelligence/machine learning (AI/ML) & quantum computing at federally regulated financial institutions (FRFIs),” OSFI said in the questionnaire. “This includes the use of AI through other tools or applications which are more broadly distributed across the institution (i.e. AI embedded in [Microsoft] tools, use of ChatGPT.

“With the expansive implementation of AI in different platforms and general use tools, it is important to understand the possible risks that may arise.”

The questionnaire includes fixed-selection and open-ended questions, and a section for comments. Financial institutions can share their plans, strategies, uses and challenges associated with AI/ML applications. They can also discuss governance and risk management practices at the enterprise-wide level related to these technologies.

OSFI is seeking feedback by Feb. 19. The regulator will use the results to:

Increase understanding of FRFIs’ involvement in AI/ML and quantum computing;
Inform policy and supervisory work; and
Assess the current state of quantum-readiness.

Following OSFI’s analysis of the results, the regulator will share current practices with participating institutions (both regulators will treat responses as confidential and not publicly disclose any institution-specific data).

OSFI’s 2023-24 Annual Risk Outlook addresses emerging risks, assesses new technologies and explores systemic and institutional vulnerabilities associated with AI/ML and quantum computing. “As AI/ML and the promise of quantum computing advances, so do potential risks to integrity and security,” OSFI said in the letter to FRFIs.

The regulator told Canadian Underwriter last month it’s also engaging with other regulatory agencies, research centres and industry practitioners, such as the Financial Industry Forum on Artificial Intelligence, to discuss how to enhance its current approach and ensure it effectively supervises new risks such as quantum computing.

“The application of quantum computing in the financial sector could bring many advantages relative to conventional computing,” OSFI told CU. “Potential use cases could range from AI/ML applications to fraud detection and portfolio allocation.

“Adoption of this technology is expected to yield greater efficiencies in time, effort and cost.”

Feature image by iStock.com/metamorworks