Global Financial Regulators Intensify AI Monitoring Amid Growing Adoption
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Global financial watchdogs to ramp up monitoring of AI
Banks have been broadly optimistic that AI will make them more productive, but regulators around the world have expressed concerns about its potential impact on financial stability. Global financial regulators have laid out plans for closer monitoring of artificial intelligence risks as banks and other parts of the financial industry ramp up the use of AI. Banks have been broadly optimistic that AI will make them more productive, but regulators around the world have expressed concerns about its potential impact on financial stability. The G20's risk watchdog, the Financial Stability Board, said in a report on Friday that if too many institutions end up using the same AI models and specialised hardware, this could lead to herd-like behaviour. "This heavy reliance can create vulnerabilities if there are few alternatives available," the board said. A separate study published by the central bank umbrella group, the Bank for International Settlements, added there was an "urgent need" for central banks, financial regulators and supervisory authorities to "raise their game" in relation to AI. "There is a need to upgrade their capabilities both as informed observers of the effects of technological advancements and as users of the technology itself," the BIS said. The United States, China and other countries around the world are currently racing to lead the development of revolutionary, machine-learning technologies. The FSB report said that while AI could amplify market stress, there was currently "little empirical evidence that AI-driven market correlations affect market outcomes". It added that financial institutions were also at risk of more AI-related cyberattacks and AI-driven fraud. Some regions have already taken the first steps towards regulating AI, including the European Union, whose Digital Operational Resilience Act (DORA) came into force in January.
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Global financial watchdogs to ramp up monitoring of AI
LONDON -- Global financial regulators have laid out plans for closer monitoring of artificial intelligence risks as banks and other parts of the financial industry ramp up the use of AI. Banks have been broadly optimistic that AI will make them more productive, but regulators around the world have expressed concerns about its potential impact on financial stability. The G20's risk watchdog, the Financial Stability Board, said in a report on Friday that if too many institutions end up using the same AI models and specialized hardware, this could lead to herd-like behavior. "This heavy reliance can create vulnerabilities if there are few alternatives available," the board said. A separate study published by the central bank umbrella group, the Bank for International Settlements, added there was an "urgent need" for central banks, financial regulators and supervisory authorities to "raise their game" in relation to AI. "There is a need to upgrade their capabilities both as informed observers of the effects of technological advancements and as users of the technology itself," the BIS said. The United States, China and other countries around the world are currently racing to lead the development of revolutionary, machine-learning technologies. The FSB report said that while AI could amplify market stress, there was currently "little empirical evidence that AI-driven market correlations affect market outcomes." It added that financial institutions were also at risk of more AI-related cyberattacks and AI-driven fraud. Some regions have already taken the first steps towards regulating AI, including the European Union, whose Digital Operational Resilience Act (DORA) came into force in January.
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Global financial watchdogs, including the G20's Financial Stability Board and the Bank for International Settlements, are increasing their scrutiny of artificial intelligence in the financial sector. This move comes as banks and financial institutions rapidly adopt AI technologies, raising concerns about potential risks to financial stability.
Global Regulators Step Up AI Oversight in Finance
Global financial regulators are taking decisive steps to enhance the monitoring of artificial intelligence (AI) risks as banks and other financial institutions increasingly adopt AI technologies. This move comes in response to growing concerns about the potential impact of AI on financial stability, despite the optimism expressed by banks regarding AI's ability to boost productivity
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Source: Economic Times
Key Regulatory Bodies Weigh In
The Financial Stability Board (FSB), the G20's risk watchdog, has released a report highlighting the need for closer scrutiny of AI in the financial sector. The report warns that if numerous institutions rely on the same AI models and specialized hardware, it could lead to herd-like behavior, potentially creating vulnerabilities in the financial system
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.Paralleling this sentiment, the Bank for International Settlements (BIS), a central bank umbrella group, has emphasized the "urgent need" for central banks, financial regulators, and supervisory authorities to enhance their capabilities in relation to AI. The BIS stresses the importance of these bodies becoming both informed observers of technological advancements and proficient users of AI technology themselves
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.Potential Risks and Concerns
While the FSB acknowledges that AI could potentially amplify market stress, it notes that there is currently "little empirical evidence that AI-driven market correlations affect market outcomes." However, the board identifies several key areas of concern:
- Cybersecurity: Financial institutions face an increased risk of AI-related cyberattacks
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. - Fraud: The potential for AI-driven fraud is a growing concern in the financial sector
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. - Market dynamics: The use of similar AI models across multiple institutions could lead to synchronized behavior, potentially exacerbating market volatility
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Global AI Development Race
The intensified focus on AI regulation in the financial sector comes against the backdrop of a global race in AI development. Countries such as the United States and China are competing to lead in the creation of revolutionary machine-learning technologies
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.Regulatory Initiatives
Some regions have already taken initial steps towards regulating AI in the financial sector. Notably, the European Union has implemented the Digital Operational Resilience Act (DORA), which came into effect in January. This act aims to establish a comprehensive framework for digital operational resilience in the financial sector, including provisions related to AI
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.As the adoption of AI in finance continues to accelerate, regulators worldwide are recognizing the need to stay ahead of potential risks while fostering innovation. The coming months and years are likely to see further developments in AI regulation and monitoring across the global financial landscape.
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