The UK Parliament’s Treasury Committee is to open a new inquiry investigating the potential impact of the increased use of AI in banking, pensions and other financial services.

According to parliament, the inquiry could explore how AI is currently being used by City firms, as well as what opportunities it brings for innovation in the financial services sector. 

MPs may also consider the potential impact that AI will have on employment in the sector, and ask how the UK compares to other countries in both its competitiveness and approach.  

The Treasury Committee said the inquiry could also review the extent to which AI might jeopardise financial stability, and question if its use is raising the potential for cybersecurity risk, including surrounding third-party dependencies, model complexity, embedded bias, and genAI hallucination behaviour.

Chair of the Committee, Dame Meg Hillier, said: “It’s critically important the City can capitalise on innovations in AI and continue to be a world leader in finance.

“We must, though, also be mindful of ensuring there are adequate safeguards in place to mitigate the associated risks, particularly for customers. This piece of work will allow us to see the full picture.”

Among other areas the Committee is most interested in exploring are questions around the current use of AI, including rates of adoption and specific use cases, as well as how those in the industry expect AI to transform the sector over the next decade.

To that end, the inquiry could examine the risks of having AI tools used in the financial sector concentrated in the hands of just a few large tech companies, and consider to what extent AI financial market tools rely on social media outlets, for example any trading algorithms using social media posts.

The parliament said that the Committee will look to find out how the government and financial regulators can strike the right balance between seizing the opportunities of AI but mitigate any threats, which could include recommendations to update existing laws, or even create new ones entirely.

“Successive governments have made clear their intention to embed and expand the use of AI to modernise the economy,” continued Dame Hillier.   

“My committee wants to understand what that will look like for the financial services sector and how the City might change in the coming years as that transformation gathers pace.

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The announcement of the new inquiry follows the latest survey conducted by the Bank of England and the FCA, which found that 75% of financial service companies are already using AI, with a further 10% planning to adopt it over the next three years, a significant jump from just two years ago. 

The Committee’s call for evidence is now open as members seek input from a range of voices, including in the finance industry, AI sector, consumers and experts, with the deadline for submissions set at Monday 17th March.