European banks are facing increasing compliance challenges due to the implementation of the General Data Protection Regulation (GDPR) and the AI Act . These regulations aim to protect fundamental rights and enhance transparency and accountability in processes that use artificial intelligence (AI) . Compliance with the GDPR and the AI Act is not only a legal obligation but also a strategic necessity for banks operating in the European market .
The GDPR, which came into effect in 2018, imposes strict rules on the collection, processing, and storage of personal data . Banks must ensure they have explicit consent from their customers to process their data and that this data is protected from unauthorized access . Furthermore, customers have the right to request access to their data, rectify it, or have it erased, also known as the "right to be forgotten" .
The AI Act, on the other hand, aims to regulate the use of artificial intelligence, setting strict requirements for AI systems considered high-risk . In the financial sector, this includes systems used for creditworthiness assessments, fraud detection, and insurance pricing . These systems must be transparent, subject to human oversight, and non-discriminatory . Banks must ensure that the AI systems they use are accurate, reliable, and do not violate the fundamental rights of citizens .
The challenges for European banks are manifold. First, they need to integrate the requirements of the GDPR and the AI Act into existing governance and risk management structures . This requires significant investments in technology, training, and human resources . Second, they must ensure that the data used to train AI systems is accurate, unbiased, and representative of the population they serve . Third, they must be able to explain how AI systems work and how decisions are made, in order to ensure transparency and accountability .
Banks that do not comply with the GDPR and the AI Act face significant penalties, including fines of up to 7% of global annual turnover or €35 million, whichever is greater . In addition, non-compliance can lead to a loss of customer trust and damage to the bank's reputation .
To address these challenges, European banks must adopt a holistic approach to compliance, which includes:
- Developing a comprehensive AI strategy that integrates the requirements of the GDPR and the AI Act .
- Creating a robust governance framework that ensures AI systems are trustworthy, unbiased, and explainable .
- Investing in the education and training of staff, so they understand the requirements of the GDPR and the AI Act and are able to apply them in practice .
- Collaborating with regulatory authorities to exchange information and better understand the requirements .
By adopting a proactive and responsible approach, European banks can turn compliance challenges into opportunities to strengthen customer trust, improve risk management, and gain a competitive advantage .