We engaged with BMO in establishing comprehensive governance practices around the ethical use of AI.
Background
As the financial services industry increases investments in digitisation, we are monitoring the implementation of artificial intelligence (AI) and other advanced technologies to ensure companies have robust oversight processes that include monitoring of potential algorithm bias to encourage an emphasis on protecting digital rights.
We engaged with Bank of Montreal (BMO) in establishing comprehensive governance practices around the ethical use of AI and conducting an algorithm impact assessment of the impact level of the banks automated decision-systems.
Our engagement
We first raised our concern with the company in 2020 with follow-up meetings across the subsequent years. The bank updated us in 2021 saying it had a trustworthy AI council comprised of leaders across business lines to ensure the implementation of AI is done in an ethical manner and aligns with company values and regulatory expectations. We encouraged supporting disclosure in its next sustainability report.
Notably, in 2022 we met with members of the sustainability and investor relations teams at the company’s headquarters. We asked about the bank’s AI strategy, to which it reassured us AI remained a priority.
We met with members of the sustainability and investor relations teams at the company’s headquarters.
The following year, we learned the bank was reviewing ethical, privacy, and compliance risks and had established escalation mechanisms through governance forums, including by ranking applicable risks, filling out questionnaires, and assigning quantitative scores. The bank was also updating its broader applicable risk frameworks with generative AI becoming more prevalent.
While the bank was making good progress on AI, in 2024, we encouraged greater disclosure on board oversight of the intersection between artificial intelligence (AI) and human capital.
We encouraged greater disclosure on board oversight of the intersection between artificial intelligence (AI) and human capital.
Changes at the company
In 2023, the bank disclosed in its sustainability report that it had built governance practices to adhere to its internal and regularly expectations, including by establishing the Responsible AI and Data Ethics Forum to ensure that any application of AI technologies at BMO aligned with its Code of Conduct, risk management frameworks and regulatory expectations. Members of the Forum have expertise in legal, compliance, privacy, ethics, cybersecurity and other applicable risk areas, and provide guidance on identifying and mitigating any such potential risks associated with AI.
With respect to board oversight, AI and data security fall within the category of operational non-financial risk, which is the responsibility of the chief risk officer and is overseen by the risk review committee. The bank has enhanced AI and data analytics capabilities across the organisation, and focuses research on emerging and innovative technology.
The bank has enhanced AI and data analytics capabilities across the organisation
According to the Evident AI Index, the bank scores above peer averages ranking 16th out of 50 banks and scoring 34.6 out of 100 points. The Evident AI Index is a third-party benchmark that compares the AI capabilities of major banks globally.
