International financial regulators are developing strategies to enhance their oversight of artificial intelligence (AI) risks within the financial sector. This initiative responds to the growing adoption of AI by banks and other institutions, which generally anticipate productivity gains from the technology.
Despite these expectations, regulatory bodies globally have expressed reservations regarding AI’s potential impact on financial stability. The Financial Stability Board (FSB), serving as the G20’s risk watchdog, detailed several vulnerabilities in a recent report. These include the potential for herd-like behavior if numerous institutions rely on the same AI models and specialized hardware, leading to systemic vulnerabilities due to a lack of alternatives.
The FSB also indicated that AI could amplify market stress, though it observed limited empirical evidence currently linking AI-driven market correlations to overall market outcomes. Furthermore, financial institutions face an increased threat of AI-related cyberattacks and fraud. This regulatory attention unfolds amidst a global competition, involving countries like the United States and China, to lead advancements in machine-learning technologies.
Source: https://indianexpress.com/article/technology/tech-news-technology/global-financial-watchdogs-to-ramp-up-monitoring-of-ai-10300517/