by Alessio Azzutti,* Pedro M. Batista,** Wolf-Georg Ringe***
Banking supervisors worldwide recognize the pressing need to harness frontier supervisory technology (SupTech) such as Artificial Intelligence (AI) to improve operational efficiency, enhance analytical capabilities, and augment decision-making. The European Central Bank (ECB) is no exception and has established a dedicated SupTech Hub to explore these opportunities. While existing literature primarily focuses on the techno-economic aspects of AI adoption by financial supervisors, this Article examines its techno-legal boundaries. The integration of AI-related technologies into banking supervision raises complex questions of fairness, transparency, and accountability, which, if not adequately addressed, can jeopardize the legality of institutional activities. This is especially critical for the ECB, an EU public institution that must adhere to democratic values, the rule of law, and fundamental rights.
With this in mind, this Article investigates the impact of AI adoption on the legality of supervisory activities, proposing a specific focus on the right to good administration as analytical framework. We first define the notion of good administration in EU banking supervision, clarifying its legal and ethical relevance for the ECB. We then analyze the potential implications of AI-enhanced banking supervision for good administration, examining how this legal concept can guide the trustworthy integration of AI into supervisory processes and procedures. Through a repurposing of the risk-based regulatory approach of the EU AI Act, we develop a normative framework for regulating AI systems based on the specific risks to good administration associated with different applications. Our proposal prioritizes transparency, accountability, and auditability requirements to ensure that future AI-enhanced banking supervision aligns with EU fundamental rights, particularly good administration.
Overall, this Article contributes to the emerging literature on the legal implications of AI adoption by financial supervisors. By offering fresh insights into the interplay between AI regulation and banking supervision, it underscores the importance of a balanced approach that protects fundamental rights while harnessing the benefits of technological progress.
* Lecturer in Law & Technology (FinTech), University of Glasgow; PhD candidate in Law, University of Hamburg. Part of this research was conducted while serving as a Research Associate at the Centre for Banking & Finance Law, National University of Singapore.
** Lecturer in Commercial, Corporate, and Banking Law, University of Leeds; PhD candidate in Law, Goethe University Frankfurt.
*** Professor of Law & Finance and Director of the Institute of Law & Economics, University of Hamburg; Visiting Professor, Stanford Law School.
Published in CJEL Vol. 29 issue 3.
Read the full article on HeinOnline, Lexis, or Westlaw. Interested in receiving the Columbia Journal of European Law in print at your university or office? Please contact our Executive Editor at ee.cjel@law.columbia.edu.
Also published in Vol. 29 issue 3:
Third Country Nationals in the EU: From Invisible Others to Potential Key Players in the European Integration Process, by Dora Kostakopoulou
EU Emergency – Call 122? On the Possibilities And Limits of Using Article 122 TFEU to Respond to Situations Of Crisis, by Daniel Calleja, Tim Maxian Rusche, Trajan Shipley
