Germany’s financial watchdog BaFin will begin supervising the use of artificial intelligence by banks and insurers after lawmakers expanded its powers under legislation that took effect on Wednesday.
The move gives BaFin authority to oversee compliance with AI rules in the financial sector and impose fines where necessary as regulators seek to protect consumers’ fundamental rights.
The new powers form part of the European Union’s rollout of its AI Act, which establishes a risk-based regulatory framework for artificial intelligence across the bloc. National regulators are being tasked with enforcing the rules in their respective sectors.
BaFin said it would monitor whether financial institutions comply with transparency requirements for AI systems, including customer-facing chatbots, and oversee the use of high-risk applications such as systems used to assess creditworthiness.
The regulator will also ensure firms do not use prohibited AI practices, including the collection and analysis of sensitive personal information in ways that could result in unfair discrimination.
“People have to be able to trust that their fundamental rights will be protected when AI is used,” BaFin President Mark Branson said.
“BaFin will ensure, for example, that everyone has fair access to financial services and that no one is discriminated against as a result of AI,” he added.
Banks and insurers across Europe are increasingly deploying AI to automate customer service, detect fraud, assess credit risk and improve operational efficiency, prompting regulators to tighten oversight of the technology’s use in financial services.
Under the AI Act, providers and users of high-risk AI systems must meet requirements on transparency, governance, risk management and human oversight, while certain AI practices deemed to pose unacceptable risks are prohibited.
BaFin said its expanded mandate would help ensure financial institutions comply with those rules while safeguarding consumers.
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Faustine Ngila is the AI Editor at Impact Newswire, based in Nairobi, Kenya. He is an award-winning journalist specializing in artificial intelligence, blockchain, and emerging technologies.
He previously worked as a global technology reporter at Quartz in New York and Digital Frontier in London, where he covered innovation, startups, and the global digital economy.
With years of experience reporting on cutting-edge technologies, Faustine focuses on AI developments, industry trends, and the impact of technology on society.
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