Global financial regulators are sounding the alarm about the growing use of artificial intelligence in the banking industry and are calling for much closer monitoring of the technology’s risks.
While banks are excited about the potential of AI to make them more efficient and profitable, regulators are worried about its potential to cause major problems for the financial system. The Financial Stability Board, a risk watchdog for the G20, warned in a new report that if too many banks and financial firms all start using the same AI models, it could lead to dangerous “herd-like” behavior in the markets. “This heavy reliance can create vulnerabilities if there are few alternatives available,” the board said.
Another report from the Bank for International Settlements (BIS), a group of central banks, stated there is an “urgent need” for regulators to “raise their game” regarding AI. The BIS argued that regulators need to become much more intelligent about both the effects of the technology and how to use it themselves.
The FSB report also highlighted other risks, like the potential for more AI-powered cyberattacks and fraud. While the report said there’s not much evidence yet that AI is causing major market problems, the message from these powerful global bodies is clear: the financial world is rushing into AI, and the regulators are scrambling to keep up.
