The rapid adoption of artificial intelligence tools in financial industries represents an evolving risk to institutional investors, according to a new report by the Office of the Superintendent of Financial Institutions.
The financial regulator noted rapid developments in the generative AI space have resulted in an increased adoption of AI tools in financial industries. While these tools can provide enhanced efficiency and improved decision-making, it noted there are also risks to financial institutions’ operational resilience.
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The regulator also cited concerns surrounding reliance on third-party partners. “The absence of robust regulatory frameworks in many third-party industries could lead to inconsistent risk management controls and makes institutions vulnerable to risks such as data breaches and disruption of services through cyberattacks or failed information technology changes.”
The OSFI is developing an overall risk rating for pension plan sponsors under its new supervisory framework, which will include a new pension supervisory information technology system. Looking ahead, the regulator will issue an updated risk management guideline next year that will include more information on the expectations it has around AI models.
In a press release, Peter Routledge, superintendent of financial institutions at the OSFI, said the regulator will adapt and respond to intensifying integrity and security risks within the Canadian financial system.
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