meta_id 3213437

The Malta Financial Services Authority (MFSA) has issued a Dear CEO Letter on Artificial Intelligence (AI) - Governance, Risk and Prudential Expectations. The MFSA aims to ensure that the adoption of artificial intelligence within the financial sector develops in a manner consistent with sound prudential principles, effective governance and the overarching objectives of financial regulation. The MFSA, through the letter, intends to achieve three key outcomes: Ensure that licence holders recognise AI as a prudentially relevant risk area, rather than solely as an operational or technological enhancement. Firms are expected to assess how AI may impact their risk profile, decision-making process and overall resilience. Firms are expected to assess how AI may impact their risk profile, decision-making process and overall resilience. Prompt a structured internal assessment within firms, particularly at the board and senior management levels. Firms should critically evaluate their current and anticipated use of AI, identify any gaps in governance, oversight or controls, and take appropriate remedial actions. Firms should critically evaluate their current and anticipated use of AI, identify any gaps in governance, oversight or controls, and take appropriate remedial actions. Promote greater consistency and preparedness across the market. The MFSA confirms that it will take its expectations into account in the course of its ongoing supervisory activities, and licence holders should be in a position to demonstrate that AI-related risks have been appropriately considered and that governance and control frameworks are commensurate with both current and anticipated levels of AI integration. Firms that fail to adequately address the risks associated with AI may be subject to increased supervisory scrutiny and, where necessary, further supervisory intervention. The CEO letter also details the findings of the MFSA’s cross-sectoral assessment to better understand the extent of AI adoption within the Maltese financial services sector. The MFSA observed that a significant proportion of firms: Do not yet have a formal or board-approved AI strategy. Rely primarily on externally provided tools, particularly generative AI solutions. Have limited internal expertise and governance structures in place to oversee AI deployment. The Dear CEO letter should serve as a basis for firms to evaluate the adequacy of their existing governance, risk management and control frameworks and to take timely action where gaps are identified.