Publication: Working Paper Series No. 138

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EBI is happy to announce a contribution of Antonella Sciarrone Alibrandi (Università Cattolica del Sacro Cuore Milan), Maddalena Rabitti (Roma Tre University) and Giulia Schneider (Università Cattolica del Sacro Cuore Milan) in the EBI Working Paper Series No. 138. Their paper entitled “The European AI Act’s Impact on Financial Markets: From Governance to Co-Regulation” was published on 11 April 2023.

The paper explores the general regulatory challenges arising from the need to mediate between a horizontal approach to AI regulation and the sector-specific dimensions of financial markets, with regards to the sectoral regulations that may already regulate some AI tools in the financial sector, the structural features of AI-driven financial services, as well as the traditional objectives of financial regulation. In this vein, the paper intends to identify the gaps left open by the AI Act’s requirements for a full control over financial AI-related risks and to provide first guidelines for the implementation of the AI Act’s horizontal requirements in the financial sector. To these ends, the paper demonstrates the relevance of the governance strategies regarding ICT risks that financial institutions – and their boards of directors – will have to develop under the Digital Operational Resilience Act (DORA), as an effective venue for addressing detected regulatory gaps in the field of financial AI. Outside the scope of single financial institutions’ compliance, and shifting to a market-wide perspective, the acknowledgment of the shortcomings related to the tools of supervised co-regulation (as regulatory sandboxes) proposed by the AI Act, confirms the importance of the enactment of sound supervisory policies by financial authorities. In this respect, it is shown how the AI Act’s provisions on AI supervision, matched with the rules under the DORA, pose fruitful legal grounds for the consolidation of financial AI supervisory schemes, based on the collaboration between different financial authorities, and between financial and other technology-relevant authorities, as the European Artificial Intelligence Board.

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