Germany\u2019s financial regulator wants to pay closer attention to the banking sector\u2019s artificial intelligence (AI) use.<\/p>\n
This move by the Federal Financial Supervisory Authority<\/a> (BaFin), announced<\/a> Wednesday (July 29), comes after the watchdog was granted new powers under the European Union\u2019s AI Act.<\/p>\n \u201cWe will look into how banks, insurers and other financial entities use AI in direct connection with regulated financial activities,\u201d Jens Oberm\u00f6ller<\/a>, director-general for cyber risks and technology in the financial sector at Bafin, said in an interview on the regulator\u2019s website.\u00a0\u201cSo we will step in when companies use AI for activities for which they need our authorization\u2014such as for banking and insurance transactions.\u201d<\/p>\n He said that Bafin will examine a sample of the AI applications used by many financial institutions in relevant areas, but does not plan to look into every AI system at every bank, as the AI Act<\/a> mandates monitoring rather than supervision.<\/p>\n \u201cWe monitor whether companies are complying with the transparency requirements and provisions regarding prohibited AI practices,\u201d Oberm\u00f6ller said. \u201cAnd we\u2019ll be looking at whether companies are taking measures to promote AI literacy among their employees.\u201d<\/p>\n This will happen right away, with Bafin moving to address \u201chigh-risk AI\u201d starting in December 2027. Systems that fall under this designation include those used by insurance companies for risk assessment and to price life and health insurance policies<\/a>.<\/p>\n \u201cAI can, for example, calculate the individual surcharges a customer must pay,\u201d Oberm\u00f6ller said. \u201cIn the case of banks and other financial institutions, \u2018high-risk AI\u2019 generally refers to AI systems used to evaluate the creditworthiness<\/a> and credit scores of natural persons.\u201d<\/p>\n In related news, PYMNTS CEO Karen Webster<\/a> spoke earlier this month with Maik Taro Wehmeyer<\/a>, co-founder and chief executive at Taktile<\/a>, who predicted that 2026 will be \u201cthe year where AI will come to financial services.\u201d<\/p>\n \u201cThe report noted some of the benefits of using AI in commercial lending and insurance. For example, small business loans that once required weeks of manual underwriting could potentially be approved in minutes.\u201d Meanwhile, insurance claims that traditionally needed months of evaluation can be handled within hours with drone imagery and AI-powered damage assessments.<\/p>\n \u201cI think many people by now confuse AI transformation<\/a> with cost savings,\u201d Wehmeyer said, noting that the bigger competitive advantage now comes from AI\u2019s ability to dramatically shrink decision times.<\/p>\n