What does Taiwan FSC AI Core Principles say about AI in banking?

What are the key points of Taiwan FSC AI Core Principles?

• Principle 1 (governance and accountability): 'Financial institutions should bear internal and external responsibilities corresponding to the AI systems they use'; internal responsibilities 'include assigning a senior executive to be responsible for related oversight and management, and establishing an internal governance framework'.
• Principle 1 also asks for 'a comprehensive and effective AI risk management mechanism', integrated into existing risk management and internal control and periodically evaluated and tested, and for employees with adequate knowledge and skills to work with AI.
• Principle 2 (fairness and human-centred values): avoid unfairness from algorithmic bias; AI should be 'human-centric and controllable by humans'; and 'Risks associated with information produced by generative AI must be objectively and professionally controlled by financial institution personnel.'
• Principle 3 (privacy and customer interests): manage and use customer data properly, respect the customer's right to choose and remind the customer of available alternatives when AI systems are used to provide financial services.
• Principle 4 (robustness and security): ensure system robustness, security and safety, and conduct 'appropriate risk management and oversight of the third-party providers' when development or operation of AI systems is outsourced.
• Principle 5 (transparency and explainability): 'Financial institutions should make proper disclosure when their AI system interacts directly with consumers.' Principle 6 covers sustainable development, including employee training and protection of employees' work rights.
• Supporting policies: the FSC will publish guidelines 'based on the principle of proportionality, using a risk-based approach'; keep its regulation under review; 'where necessary, conduct special financial examinations' of institutions' AI use; and instruct financial industry associations to draft self-regulatory standards and best practices.
• The paper says it draws on the Executive Yuan's AI Taiwan Action Plan 2.0 and on guiding principles issued by financial supervisors of major countries and by international organisations.

What did Taiwan FSC AI Core Principles change for banks?

The paper fixed the structure of what followed: the six principles became the six chapters of the June 2024 Guidelines, and the paper committed the FSC to a proportionate, risk-based approach built on guidelines, review of its existing regulation, industry self-regulation and examinations.