Artificial intelligence risks amplifying financial stability risks and undermining trust in banks, a Bank of England analysis concluded as global leaders and businesses prepare for a crucial summit on containing the technology.
(Bloomberg) — Artificial intelligence risks amplifying financial stability risks and undermining trust in banks, a Bank of England analysis concluded as global leaders and businesses prepare for a crucial summit on containing the technology.
A paper published on Bank Underground, a blog for BOE staff, said that central banks will need to consider how to curtail AI risks for financial firms and raised concerns over how the technology could discriminate against customers.
“The potential impact of AI-related risks to firms may not appear to be significant in isolation but, in combination with other risks, could impact capital and, ultimately, lead to material losses,” said Kathleen Blake, who works in the BOE’s Fintech Hub.
AI could “potentially lead to stability issues for financial institutions or the financial system as a whole,” she said.
The comments add to growing concern among officials over the technology’s rapid rise ahead of a summit of politicians and businesses on AI safety hosted by the UK in November.
The BOE research warned that models may copy patterns of previous “discriminatory decision-making” and pointed to examples of algorithms being biased against women.
“If multiple firms utilize opaque or black box models in their trading strategies it would be difficult for both firms and supervisors to predict how actions directed by models will affect markets,” Blake said.
“It might also be the case that they can exacerbate channels of financial stability risk since trust is key for financial stability. In periods of low trust or high panic, financial firms see increases in financial instability which can produce a spectrum of outcomes such as market instability or bank runs.”
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