The document discusses the implications of artificial intelligence (AI) in the financial sector and how to mitigate potential risks.
The Financial Stability Board (FSB), an international body that monitors the global financial system, published a paper analyzing the impact of AI on financial services.
The report acknowledges that AI offers many benefits, such as enhancing operational efficiency, personalizing products, improving regulatory compliance, and providing advanced data analytics.
However, it also highlights the potential for AI to amplify vulnerabilities in the financial sector.
These vulnerabilities include third-party dependencies and service provider concentration, cyber risks, market correlations and model risks, and data quality and governance issues.
The FSB also recognizes the risk of malicious actors using generative AI to commit financial fraud, such as AI-powered deepfake crypto scams.
To address these risks, the FSB recommends solutions, including addressing data and information gaps in monitoring AI developments, enhancing regulators’ engagement with the private sector, and assessing whether current regulatory frameworks adequately address local and international vulnerabilities.