Opportunities of Gen AI in the Banking Industry with regards to the AI Act, GDPR, Data Act and DORA

Generative Artificial Intelligence (Gen AI) stands at the forefront of the banking sector's technological revolution, promising enhancements in decision-making, risk management, and customer interaction. This paper examines Gen AI's potential to inject innovation and efficiency into banking services, with an estimated value addition of up to $340 billion annually. Grounded in advancements in NLP through Transformer architecture and evolving GPT models, Gen AI's applications in the banking industry are extensive. They range from personalizing customer service with AI-driven chatbots to revolutionizing credit scoring and trading strategies. However, alongside these opportunities, the paper addresses the significant challenges of regulatory compliance, ethical data usage, and the technical integration of AI systems. With the impending release of the EU's AI Act and existing GDPR and DORA, financial institutions must strategize to align with new standards while harnessing Gen AI's capabilities for process optimization and enhanced service delivery. The role of international standards such as ISO/IEC 42001:2023, ISO 31000:2018, ISO/IEC 23894:2023, NIST AI 600-1 and ISO/IEC 23053:2022 is considered to be beneficial in establishing a common framework for managing AI systems, ensuring data integrity and promoting transparency. By adopting these standards, banks can facilitate compliance across various jurisdictions, enhancing operational consistency and reliability – but certain significant limitations in addressing specific regulatory requirements must be taken into account. The paper concludes that Gen AI's future in banking will be transformative, driven by the industry's need to balance technological innovation with ethical and regulatory requirements and process standardization, which will lead to more transparent, personalized and efficient banking services.