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In a draft report, legislators have called for greater clarity and consistency in the oversight of artificial intelligence (AI) in the financial sector, amid concerns that overlapping rules could stifle innovation and trigger legal uncertainty.
The report, released by the European Parliament’s Economic and Monetary Affairs (ECON) Committee and authored by Arba Kokalari, a member of the European Parliament (MEP), acknowledges the growing role of AI in Europe’s financial services industry, including in back-office automation and fraud detection.
The report is industry friendly and is ambitious about AI’s potential for the financial services industry.
It concludes that, despite rapid advancements, most AI applications in finance remain limited in scope, and that as yet there are few customer-facing use cases and no fully autonomous decision-making systems.
“We are far from experiencing a financial system run, or heavily dependent on, autonomous, auto-pilot AI models that threatens financial stability and consumers’ interests,” said Kokalari, who sits with the centre-right Moderate Party.
The MEP concludes in the draft report that “the reality is the opposite”.
“The sector is so heavily regulated, and the fiduciary responsibility of financial institutions so highly regarded, that the lion’s share of use cases are both low-risk and include a human expert in the loop,” she says.
Regulatory overlaps
The report highlights potential friction between the EU’s landmark Artificial Intelligence Act, adopted in 2024 as the world’s first comprehensive AI law, and existing financial regulations.
It stresses that financial services firms are already subject to extensive rules on data governance, operational resilience, outsourcing and model risk, and concludes that together these form a de facto framework for managing AI.
In the report, the ECON committee warns that duplicating these rules under the AI Act could complicate compliance and deter adoption, and warns against a “maximalist approach” some regulators might take in interpreting the AI Act.
According to the report, this could complicate compliance for financial institutions, given that the AI Act “recognises the challenge arising from the fact that supervisory agencies have differing legal interpretations and expectations in terms of the application of the acquis, resulting in fragmentation of the single market”.
To address these issues, lawmakers in the European Parliament have called on the European Commission to issue guidance clarifying how existing financial rules interact with AI-specific obligations.
They have urged regulators to adopt consistent definitions, streamline reporting requirements and resist layering on new legislation.
Calls to action
Another feature of the report is that the ECON committee “regrets that the EU is lagging behind in terms of AI innovation and investment [and] believes that the financial services sector, as the largest spender on ICT services and products, has the potential to act as a catalyst in mobilising private investment in AI”.
It calls on the European Commission to ensure clarity and guidance on how existing financial services regulations apply to the use of AI in financial services.
The committee argues that such guidance should aim to enable the use of AI in the financial services sector, and advocates for “consistent definitions and the simplification of the regulatory framework to avoid duplicated requirements, including risk assessment reporting requirements”.
It also warns against the adoption of new sectoral legislation to regulate AI in financial services, which it suggests already has “established sectoral rules that cover AI deployment”.
It suggests that further regulation “would create additional layers of complexity and uncertainty and ultimately deprive the sector of the benefits of AI use”.
The report advises the commission and member states to coordinate to avoid “gold-plating relevant legislation and to prevent the creation of new barriers in cross-border markets”.
It also expresses concern about the financial sector’s dependence on third-country technology providers for AI tools and cloud services, warning this could introduce concentration risks and reduce institutions’ bargaining power.
Although the committee supports EU initiatives to boost sovereign cloud and AI development, it insists firms must retain the flexibility to use existing infrastructure.
Looking ahead
In terms of next steps, the draft resolution will be subject to amendments before being finalised and put to a vote in the European Parliament.
If adopted, it will serve as the Parliament’s official position on AI’s role in financial services and a call to action for the commission and national regulators.
AI has so far been subject to horizontal regulation in the EU, and there has been limited appetite from the commission to make regulation more specific on the matter.
However, last year, it did consult on how financial services firms use AI, as well as the benefits and challenges of doing so.
In addition, MEP Dan-Ştefan Motreanu recently pushed the commission to take on criminal use of AI, including online fraud.
