EBI is happy to announce a contribution from Alessio Azzutti (National University of Singapore), Pedro Magalhães Batista (University of Leeds) and Wolf-Georg Ringe (University of Hamburg) in the EBI Working Paper Series No. 140. Their paper, “Navigating the Legal Landscape of AI-Enhanced Banking Supervision: Protecting EU Fundamental Rights and Ensuring Good Administration”, was published online on 27 April 2023.

Banking supervisors worldwide recognise the pressing need to harness frontier technologies such as Artificial Intelligence (AI), particularly Machine Learning (ML), to enhance their analytical capabilities, augment decision-making, and improve overall operational efficiency. This study investigates the implications of AI adoption on EU fundamental rights, specifically the right to good administration. To this end, the authors first define the notion of good administration in banking supervision, exploring its legal and ethical relevance for the European Central Bank. Hence, they analyse the potential implications of AI for good administration and examine how this legal concept may inform the trustworthy integration of AI/ML tools into supervisory processes and procedures.

Drawing inspiration from the proposed EU AI Act, the authors develop a normative framework for regulating AI systems based on specific risks associated with different applications. The proposed framework prioritises transparency, auditability, and accountability requirements to ensure that future AI-enhanced banking supervision is aligned with the principles of good administration. Overall, this study contributes to the growing literature on the legal implications of AI adoption by financial supervisors, underscoring the importance of a balanced approach that upholds fundamental rights while harnessing the benefits of technological progress.

To read the entire paper, please follow https://ssrn.com/abstract=4430642 or http://dx.doi.org/10.2139/ssrn.4430642.