OSFI, FCAC to explore industry plans for AI, quantum computing

Federal financial regulators are examining how banks and insurers are using artificial intelligence (AI), and how they may react to the advent of quantum computing, an emerging technology that could dramatically expand computing power.

In a letter to the industry, the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC) said the review will inform both their policymaking and their supervisory work.

Back in October, the U.S. Financial Industry Regulatory Authority Inc. (FINRA) launched a consultation on the possible use of quantum computing in the securities industry, citing its potential to transform an array of functions, including trading, portfolio management and AI-powered advice.

It also flagged possible threats to firms’ security, as quantum computers could theoretically crack existing encryption standards, and raise the risk of algorithm errors that end up damaging market stability.

These same sorts of concerns are underlying the review launched today by OSFI and the FCAC.

“As AI/ML and the promise of quantum computing advances, so do potential risks to integrity and security,” they said in their letter.

Among other things, they’re looking for insight into financial institutions’ plans, uses, and challenges with AI, and their governance and risk management approach to these technologies.

The deadline for responding to OSFI and the FCAC is Feb. 19, 2024. FINRA’s consultation runs until March 15, 2024.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.