UK regulators have warned banks against using artificial intelligence (AI) in loan applications, as high street lenders must ensure machine learning does not worsen discrimination at the regard to minorities.
Major banks are exploring ways to further automate their lending, including the use of AI and more advanced algorithms, to decide who to lend to based on historical data held on different types of borrowers, who may be grouped by categories such as postal codes and job profiles.
UK financial regulators have warned banks looking to use AI to approve loan applications that they can only deploy the technology if they can prove it will not worsen discrimination against minorities, who are already struggling to borrow.
Banks believe that using machine learning techniques to make lending decisions could reduce discrimination against ethnic groups that have historically struggled to access loans at reasonable prices. They believe that AI would not make the same subjective and unfair judgments as humans.
In their communication on digital finance regulation, EU financial regulators called on lawmakers to consider analyzing the use of data in AI/machine learning models and potential biases leading to discrimination and excluding.
Banks in the UK were cleared of racism in lending decisions by a government review almost a decade ago, but have consistently been found to lend less to ethnic minorities.