FCA/PRA AI Governance Expectations | Trusted AI Governance

Regulatory Expectations

FCA/PRA Supervisory Standards for AI

The FCA and PRA have established comprehensive supervisory expectations for firms deploying AI systems in regulated activities, emphasizing governance, risk management, and consumer protection

Model Risk Management

Firms must implement robust model risk management frameworks covering development, validation, ongoing monitoring, and governance of AI models. PRA expectations align with SR 11-7 principles adapted for AI systems.

Consumer Duty Compliance

FCA Consumer Duty requires firms ensure AI-driven decisions deliver good customer outcomes. Algorithmic systems must be designed, tested, and monitored to prevent foreseeable harm.

Operational Resilience

AI systems supporting important business services must meet operational resilience requirements including scenario testing, impact tolerances, and continuity planning for model failures.

Key Requirements

FCA/PRA Expectations for AI Governance

Comprehensive regulatory expectations firms must meet when deploying AI in regulated financial services

Governance Framework: Establish Board-level oversight of AI strategy and risks. Clear accountability structures with Senior Manager responsibility for AI governance under SMCR.
Model Development Standards: Implement rigorous development standards including conceptual soundness, data quality requirements, bias testing, and documentation of model limitations.
Independent Validation: Conduct independent model validation before deployment and periodically thereafter. Validation must assess conceptual soundness, ongoing performance, and compliance.
Consumer Duty Compliance: Design AI systems to deliver good customer outcomes. Test for discriminatory impacts, explain automated decisions, and enable effective customer recourse.
Ongoing Monitoring: Continuous monitoring of model performance, data drift, concept drift, and alignment with original design objectives. Escalation procedures for model degradation.
Explainability & Transparency: Ensure AI decisions can be explained to customers, regulators, and internal stakeholders. Document decision logic and provide meaningful human oversight.
Third-Party Risk Management: Enhanced due diligence for externally-developed AI models. Ongoing monitoring, contractual rights to audit, and contingency planning for vendor failure.
Regulatory Reporting: Proactive engagement with FCA/PRA on material AI deployments. Timely notification of model failures, breaches, or significant performance degradation.

Who This Applies To

Firms Subject to FCA/PRA Oversight

All FCA and PRA-regulated firms deploying AI must comply with supervisory expectations

🏦 FCA-Regulated Firms

Banks, building societies, consumer credit firms, investment firms, and insurance intermediaries using AI in customer-facing decisions or operational processes.

🏛️ Dual-Regulated Firms

Large banks, insurers, and investment firms regulated by both FCA and PRA must meet expectations from both regulators for AI governance and model risk management.

📊 High-Risk AI Deployments

Particular scrutiny for AI in credit decisioning, pricing, fraud detection, AML/CFT, trading algorithms, and any system impacting Consumer Duty obligations.

How We Help

FCA/PRA Compliance Advisory Services

Expert guidance on meeting FCA/PRA supervisory expectations for AI governance, model risk management, and regulatory compliance

🎯 Model Risk Management

Design and implement model risk management frameworks aligned with PRA expectations. Model development standards, independent validation, and ongoing monitoring processes.

📋 Consumer Duty Compliance

Assess AI systems for Consumer Duty compliance. Test for discriminatory outcomes, implement explainability controls, and design customer recourse mechanisms.

🏛️ Regulatory Engagement

Prepare for FCA/PRA supervisory reviews. Develop regulatory reporting, respond to information requests, and demonstrate compliance with AI governance expectations.

Get In Touch

Discuss FCA/PRA Compliance for AI

Schedule a consultation to discuss regulatory expectations and AI governance compliance with FCA/PRA supervisory standards

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Book a 30-minute consultation to discuss FCA/PRA compliance requirements and AI governance regulatory expectations.

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Trusted AI Governance Ltd
London, United Kingdom
Company No: 15696417

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Response Time

We respond to FCA/PRA compliance inquiries within 1 business day. Advisory engagements typically start within 2 weeks.

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