Financial Conduct Authority chief executive Nikhil Rathi has warned that as finance becomes more digital, managers will still be on the hook for mistakes.
“From masters of the universe to demigods of data, finance and Big Tech firms will have enormous power over the direction of our lives,” Nikhil Rathi told UK Finance’s annual dinner on 16 November. “We can rage against the machine, but ultimately we have to agree that the responsibility for algorithms and artificial intelligence stops with the human leaders at the top of the companies.”
Markets Watchdog has positioned itself as a world leader in areas such as fintech in recent years, and has set up so-called ‘sandboxes’ and ‘sprints’ for start-ups to collaborate with the regulator on compliance issues.
However, the FCA has also expressed concern about the impact technology monopolies can have on consumers. In October, it launched a discussion paper on the potential damage that big tech companies such as Google, Apple, Facebook and Amazon could cause as they all move into the financial sector.
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“While AI needs governance for consumers to move from a place of fear to trust, many of the rules covering financial services will already be in place,” Rathi told the UK Finance dinner.
Amid an ongoing crisis in crypto markets triggered by the collapse of Sam Bankman-Fried’s FTX exchange, Rathi also briefly noted the need to properly regulate the sector.
“When the government stated its intention to make the UK a global crypto hub, ministers were explicit the way to achieve this was to move quickly while applying high standards of protection, citing our work around [anti-money laundering] registrations, sanctions and pressure for greater power over financial promotions,” he said. “This plus our global leadership position means we are in a position to act, not talk.”
During the dinner, the chairman of UK Finance, Bob Wigley, also said that “our regulators must stay at the forefront of applying the principles of ‘same activity, same risk, same regulation’ to the large technology platforms that are increasingly moving into our business , but without corresponding regulation.”
However, he added that watchdogs risked driving crypto, a “nascent but potentially huge growth business, out of the regulated sector into the unregulated” with excessive rules.
“While the Government and the FCA have taken some welcome steps to advance the UK in this area, I would like to see a more proactive partnership between government, regulators and our industry to seize the opportunity new technology offers, not just address the risk,” he added to.
Wigley also called on the government to tackle “excessive rates of overall taxes on banks in London compared to other global financial centres, particularly Amsterdam, Frankfurt, Dublin and New York” at the Autumn Statement on 17 November.
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