Nation promotes safe AI adoption in finance

China has called for stronger risk-based, tiered management of the development and application of artificial intelligence at banking and insurance institutions, in order to effectively address the challenges posed by AI development while better serving the real economy and meeting the needs of the public.

The National Financial Regulatory Administration said on Thursday that it has issued guidelines on the safe development and application of AI in the banking and insurance sectors.

An official with the regulatory body said the guidelines not only aim to regulate the development and use of AI by banking and insurance institutions, but also effectively prevent and control risks arising from AI applications, promote the high-quality development of digital finance, advance the orderly integration of AI innovation with financial services, and guide the healthy and orderly development of AI use in the financial sector in a manner that is beneficial, safe and fair.

The guidelines require financial institutions to strengthen top-level planning and overall governance by establishing a comprehensive AI life cycle management framework and enhancing oversight of application scenarios and business processes. Institutions are encouraged to build, as needed, independently controllable, secure and efficient intelligent computing infrastructure. Large financial institutions with the necessary capabilities are encouraged to provide computing-power services to smaller institutions and support industry efforts to jointly build and share infrastructure.

In addition, financial institutions are required to include AI-related risks in their comprehensive risk management frameworks, implement risk-based classification and tiered management, and establish access controls for highrisk AI applications. Human oversight and intervention mechanisms must be put in place at key stages of high-risk applications, while outsourcing and supply-chain risk management should also be strengthened.

The regulatory official said financial institutions should conduct regular assessments and reviews of AI-related risks and risk-control measures, guarding against risks such as "black box" models (AI systems whose internal workings are not visible to their users), AI hallucinations and algorithmic bias, while strengthening cybersecurity, data security and customer information protection.

Financial institutions should build AI capabilities that combine security, transparency and accountability, while balancing risk control with business development. They should strengthen data security and personal information protection, strictly implement data classification and protection requirements, and improve content filtering and data desensitization measures, the official said.

The guidelines mark the National Financial Regulatory Administration's first dedicated regulatory framework for the safe development and use of artificial intelligence in the banking and insurance sectors, said Dong Ximiao, chief economist at Merchants Union Consumer Finance and executive director of the Shanghai Institution for Finance and Development.

The guidelines address the challenge of some financial institutions adopting AI blindly without adequate regulatory guidance, while they also establish rules, define red lines and set the direction for AI applications in the banking and insurance sectors, he said.

Beyond risk control, the guidelines chart a path for the high-quality development of AI in finance, emphasizing secure, practical and self-reliant technological development. They are designed to ensure that AI serves the real economy, promotes the orderly integration of technological innovation with financial services, and supports the sustainable growth of digital finance, Dong said.

One notable feature of the guidelines is that they provide, for the first time, a clear definition of high-risk application scenarios, including fund trading, credit approval, and underwriting and claims settlement, he said. AI applications in those areas must be approved by the risk management committee of a financial institution and reported to the regulatory administration.

The guidelines also support the co-construction and sharing of computing resources across the industry, which will help to ease computing bottlenecks faced by smaller institutions and promote more balanced, sector-wide development, Dong said.

Furthermore, the guidelines establish strict red lines for data privacy protection by explicitly prohibiting the use of sensitive personal information, such as names and identification numbers, in the training and optimization of generative AI models, he noted.

In addition, financial institutions are required to maintain end-to-end oversight of AI applications, while continuously improving model transparency, which will help ensure that algorithmic decision-making remains compliant and traceable, providing an institutional framework for the safe application and healthy innovation of AI in the financial sector, Dong said.

jiangxueqing@chinadaily.com.cn