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ARTICLE · 05 OCTOBER 2026

Spotlight On AI In Financial Services

A&O Shearman
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Financial services regulators are developing new approaches to supervise AI use in capital markets, with IOSCO's recent toolkit revealing key expectations around governance, risk management, and human oversight. This analysis examines what banks and financial institutions need to know about regulatory priorities for AI deployment, from addressing hallucination risks to managing third-party dependencies. Understanding these supervisory frameworks is essential for firms seeking to align their AI strategies wi

United KingdomFinance and Banking
Tamara Cizeika
Tamara Cizeika
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The last few months have involved a number of regulatory developments in relation to AI, but one particularly useful paper is a report published by the International Organization of Securities Commissions (IOSCO). This considers how financial services regulators can supervise AI use, providing banks and financial services firms with a useful snapshot of what they can or should do to satisfy expectations and manage regulatory risk.

This bulletin provides a summary of some of the key points from this paper, together with a checklist for firms that we have prepared drawing on the AI supervisory tool included in the IOSCO report.

1. Regulatory supervision of AI use

Following work by its Fintech Task Force (FTF), IOSCO has published a report titled “Supervisory Toolkit for AI Use in Capital Markets”.1 For the industry, this provides an insight into what supervisors are likely to be concerned about in relation to a firm’s use of AI, where they might focus attention, what questions they

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