Technology Is Neutral, Governance Is Not

In a speech delivered in late February, Pedro Machado, a member of the Supervisory Board of the European Central Bank (ECB), urged banks to take a more structured and accountable approach to AI adoption, warning that rapid deployment without sound governance poses material risks to the stability of the banking sector.

Machado noted that AI use is no longer marginal, with over 85% of large European banks already deploying it in some form. He emphasized that AI has expanded well beyond traditional applications such as credit scoring and fraud detection and is now embedded in IT operations, legal analysis, and customer-facing functions. “AI is no longer confined to specialist modeling teams,” Machado observed. “It is now becoming part of the day-to-day operating fabric of banks.”

While acknowledging progress, Machado identified persistent governance gaps, particularly around accountability, senior management oversight, and independent challenge mechanisms. He stressed that “AI does not dilute responsibility — if anything, it raises the bar.” On generative AI specifically, he flagged concentration risk and vendor lock-in as emerging concerns requiring targeted supervisory attention.

“Efficiency gains and innovation are legitimate objectives,” Machado said. “But they must be pursued within a framework of control and accountability. Banks must also ensure that their strategy is aligned with their internal capabilities, not only in terms of financial resources, but also human resources such as IT skills, cultural change, and innovation enablement, which are all key to success.”

Machado clarified that the ECB’s approach remains technology-neutral, focused on how banks govern and manage risk rather than the technology itself. “The supervisory objective is not to slow down this transformation,” he said, “but to ensure that banks embrace new technologies prudently and remain fully in control from the outset.”