A financial services company is building an AI-powered loan approval system. The AI governance team requires a formal AI risk tiering process before deployment. According to responsible AI principles and EU AI Act alignment, what risk tier would an automated loan approval AI system typically fall under?
Select an answer to reveal the explanation.
Short Explanation
Here's the deal — an automated loan approval system that scores creditworthiness for people falls under the high-risk tier in the EU AI Act. You need conformity assessments, technical documentation, human oversight, logging, and EU database registration before you deploy it.
Full Explanation
The high-risk option is correct because under the EU AI Act, AI systems used for creditworthiness assessment and credit scoring for natural persons are explicitly categorized as high-risk AI systems. High-risk systems require conformity assessments, technical documentation, human oversight mechanisms, logging capabilities, and registration in the EU database before deployment. The unacceptable-risk, banned-application option is incorrect because high-risk is not the same as unacceptable risk; unacceptable-risk applications include social scoring by governments and cognitive behavioral manipulation. The limited-risk, transparency-only option is incorrect because limited risk applies to systems like chatbots that require transparency obligations. The minimal-risk, no-specific-obligations option is incorrect because credit scoring AI systems are explicitly listed as high-risk under the EU AI Act.